How Much Does a Fractional CFO Cost?
SMEs are constantly having to adapt and navigate challenges to achieve growth - and financial leadership can be the make or break factor. However, the high cost of hiring a full-time Chief Financial Officer (CFO), otherwise known as a Finance Director (FD) can be a daunting expense. Enter the solution that's gaining traction among astute business owners: the fractional CFO. This blog explores the cost-effective nature of fractional CFO services and why they are becoming an indispensable asset for SMEs.
While you may feel your business needs a full time CFO, it comes with a hefty price. So what’s the next best thing, without compromising?
The Cost-Benefit Analysis of a Fractional CFO:
For many SMEs, the idea of employing a full-time CFO is a luxury. The comprehensive compensation package, including a hefty salary currently averaging £120,000, pension contributions, bonuses, holiday pay, and sick leave, adds up quickly, making it an expensive commitment. With finance leaders well aware of the cash flow challenges some SMEs might have, it seems counterintuitive to splash out on an expert CFO, even though they may need it!
But this is where the concept of a fractional CFO shines. Unlike their full-time counterparts, fractional CFOs offer their equal expertise without many of the flashy benefits. Here are some of the ways you can save with a part-time FD.
Pension Contributions
Typically, full-time CFOs are entitled to pension schemes, which can be a considerable financial commitment for the employer. By engaging a fractional CFO, your business sidesteps this expense, as these part-time executives usually manage their pension plans, freeing up your capital for other strategic investments.
Bonuses
Full-time CFOs often have bonus structures tied to company performance, individual achievements, or both, which can lead to significant payouts. A fractional CFO, however, works on a contracted basis, meaning their compensation is agreed upon upfront and isn't subject to variable bonuses, providing more predictable financial planning for your business.
Holiday and Sick Pay
Full-time employees are entitled to paid leave, including holidays and sick days, which represent a cost to the company even when the employee isn't working. Fractional CFOs, on the other hand, are typically contracted and paid for the actual hours they work or on a project basis, eliminating the need to cover for paid time off. If your assigned fractional CFO is off unwell or on holiday for a significant period of time, a company like The Finance People would provide a replacement CFO.
Recruitment and Training Costs
Hiring a full-time CFO involves substantial recruitment costs, including advertising the position, hiring recruitment agencies, and potentially covering relocation expenses. Additionally, once onboard, there may be significant training and integration costs to get them up to speed. With a fractional CFO, these costs are significantly reduced or eliminated, as these professionals come with the requisite skills and can integrate quickly into your business with minimal onboarding. Further, they can work flexibly and remotely.
Understanding the Value of a Fractional CFO:
Not just limited to cost savings, a fractional CFO offers further benefits too. A fractional CFO brings a wealth of experience and strategic insight to the table, offering tailored financial guidance and high-level strategic planning without the full-time price tag. Here are some of the key benefits of working with a fractional CFO.
Flexibility and Scalability:
One of the key advantages of engaging a fractional CFO is the flexibility and scalability of the service. Businesses can scale up or down the hours and services based on their current needs and financial capacity, ensuring they only pay for the expertise they require. This adaptable approach makes a fractional CFO an ideal partner for SMEs looking to manage their finances efficiently while focusing on growth and scalability.
Strategic Financial Leadership:
Despite the cost-effectiveness, hiring a fractional CFO doesn't mean compromising on quality. These professionals bring a depth of knowledge and strategic acumen, often drawn from diverse industries and large corporations, to SMEs. They provide strategic financial planning, risk management, cash flow optimisation, and investment advice tailored to the unique needs of smaller enterprises.
Data & Financial Visibility:
A fractional CFO significantly enhances data-driven decision-making and financial visibility within SMEs. This professional's expertise in leveraging advanced financial tools, analytics, and reporting systems means that business owners gain a clearer, real-time insight into their financial health. This enhanced visibility is crucial for making informed decisions, identifying trends, and uncovering potential issues before they escalate.
Want to discover more advantages of hiring a fractional CFO? Check out our blog here.
Meet your fractional CFO, with The Finance People
For SME business owners the decision to hire a fractional CFO is both strategic and financially sound. This cost-effective approach ensures that businesses can enjoy the benefits of experienced financial leadership without the cost of a CFO having a harsh impact on their cash flow.
Are you ready to explore how a fractional CFO can transform your business's financial management and strategic planning without the full-time expense? Get in touch with us today to learn more about our flexible, tailored fractional CFO services designed to empower SMEs for success.