Do you need one, or do you need an accountant
This is the question, and the honest answer is frequently the accountant. An accountant files, complies and reports on what already happened. A CFO decides what should happen next: pricing, margin, whether you can afford the hire, whether the growth is worth the cash it consumes.
If your numbers arrive late and you do not trust them, you have a bookkeeping problem and a CFO will not fix it, they will tell you to fix it. Fix that first and you may find you never needed the seat.
- You need an accountant, not a CFO, if the problem is filing, payroll, VAT or getting accurate management accounts out on time.
- You need a CFO if the numbers are fine and the decisions are not: pricing, margin, whether to take the contract, whether the business can fund its own growth.
What the seat is actually for here
- Pricing and margin. The single most common finding in an owner-managed business is that one product line or one customer is quietly unprofitable and has been for years.
- Cash timing. Profitable businesses run out of money. A rolling cash forecast is the difference between knowing that in March and discovering it in June.
- Whether growth is affordable. Growth consumes cash before it produces it, and the fastest way to kill a healthy small business is to grow it faster than it can fund.
- Getting the business fundable or saleable, which usually means several years of tidying before it is worth starting.
What it costs, and the honest comparison
A fractional CFO charges £800 to £1,500 a day. For most owner-managed businesses one day a week is more than enough, and many run one or two days a month once the basics are in place, which is a smaller number than most people expect.
The comparison worth making is not against a full-time CFO, which you were never going to hire. It is against the cost of the decisions being made without one. If a pricing change worth five percent of revenue has been sitting unmade for two years, the arithmetic is not close.
The pattern that works
Start heavier and taper. A sensible shape is one day a week for the first quarter while they fix the reporting, understand the margins and build the forecast, then drop to a day or two a month to keep it current and be there for decisions.
That taper is a good test of who you are dealing with. An operator who proposes it is thinking about your business. One who proposes an indefinite retainer at the same level is thinking about theirs.
What to be careful of
- A minimum term on a seat you may only need for two quarters.
- Anybody who recommends a finance team before looking at whether your bookkeeper and your software can carry the load.
- Somebody whose experience is entirely venture-backed. The disciplines differ, and a startup CFO in an owner-managed business often optimises for the wrong thing.
- A package that bundles the CFO with bookkeeping from the same provider. It can work, and it also removes the person best placed to tell you the bookkeeping is not good enough.
Questions
- Does a small business really need a fractional CFO?
- Often not. If the problem is late or unreliable numbers, that is a bookkeeping and systems problem and an accountant is the right answer. The seat earns its cost when the numbers are reliable and the decisions on top of them, pricing, margin, growth and cash, are being made on instinct.
- How many days does a small business need?
- Less than most people assume. A common shape is one day a week for the first quarter to fix reporting and build a forecast, then one or two days a month to keep it current and be available for decisions.
- Is a fractional CFO cheaper than an accountant?
- No, the day rate is considerably higher, and they do different jobs. Most owner-managed businesses need both: an accountant to produce reliable numbers and file, and a CFO for far fewer days to decide what to do about what the numbers say.