The Differences Between Full-Time, Part-Time & Fractional CFOs
The role of Chief Financial Officer (CFO) is an undeniably integral one in any type of organization—large, medium or small. It’s the high-ranking job of managing various aspects of the company’s financial planning and analyses, and it encompasses a breadth of strategic responsibilities related to the financial health of the business. Without this critical leadership prong, a company can quickly find itself failing to meet its financial goals, without understanding why or how to change it.
Even for businesses that acknowledge the significance of this role, there’s often confusion about the differences between full-time, part-time and fractional CFOs, but the distinctions are meaningful. They inform the crucial decision about which option best suits the needs of the company. To help sort through the nuances of these variations, we’re comparing and contrasting the realities of opting for a full-time CFO versus a part-time or fractional CFO.
Internal Employee Vs. External Service
The more traditional role of CFO, especially in larger companies, is a full-time position. This means the CFO is treated as an employee of the organization, working on-site and available as a resource for all of the business’s working hours. This role typically receives a substantial salary and full benefits. Hiring a full-time CFO involves the type of HR effort that most high-level, internal jobs necessitate, as well as the full gamut of onboarding, training and retaining. If a full-time CFO leaves for any reason, the HR cycle to fill the gap begins again.
At smaller organizations, a full-time CFO might be pressed to fill a full 40-hour week with the traditional responsibilities of this job alone. That’s why CFOs in this sort of situation sometimes take on additional tasks outside the usual scope of financial planning, analyses and management. It might mean that the company is paying a CFO-level salary for someone spending a significant portion of their job on less expensive functions, like bookkeeping, accounting, office management or IT.
In contrast to the full-time CFO, a part-time CFO—also referred to as a fractional CFO—is not treated as an employee, but rather as a hired contractor. This person may work independently or under the employment of an outsourced firm. They are paid on a purely hourly basis and only for the time spent catering to the client organization. While there may be some time spent at the client company for various reasons, this type of CFO generally works remotely, given that they also serve other clients in their portfolio.
For businesses on the smaller or start-up end of the spectrum, contracting the services of a part-time or fractional CFO means getting all the advantages of CFO guidance and leadership when needed, without paying full-time compensation or dealing with the administrative hassles. Because they are not an employee of the company, they may not be as immediately accessible as a full-time CFO, but their knowledge and expertise is no less valuable to a business requiring effective financial strategy.
Juxtaposition of CFO Responsibilities
A business necessitates different financial leadership needs at various stages of their growth and operation, which is why having the option of a full-time CFO versus a part-time or fractional CFO is so consequential. Generally speaking, the knowledge, skills and expertise provided by either one don’t change drastically between the two, but there are some notable distinctions to point out.
On the strategy, planning and analysis side of things, you can expect both a full-time and part-time CFO to support the company’s financial health through many of the following efforts:
- Creating effective financial strategies designed to reach the company’s business objectives
- Guiding key business decisions related to expenses, financing, capital considerations and risk management
- Defining a set of metrics for the company and its various internal groups, and ensuring those metrics align with business objectives
- Implementing systems and reporting to track metrics, and interpreting financial data to inform business decisions
- Managing cash flow, budgeting and forecasting with strong financial plans and predictions
Because a CFO is an advocate for the business’s financial success, there is also an element of management and relationship-building involved, though this aspect of the role looks a bit different between the full-time and part-time professional.
Part of the job of a full-time CFO involves management responsibilities in the form of clear communication with and alignment of each group and individual toward the same top-level company objectives. This generally entails rendering performance feedback, reporting to shareholders and other C-suite members, providing thought leadership to all relevant entities and possibly even overseeing a range of departments and employees beyond the scope of finance and accounting.
Outsourced or fractional CFOs, on the other hand, serve in less of a managerial capacity and more of an influencer role. Their financial relations expertise surfaces mainly in the form of engagement in external financial relationships, like those with bankers, investors and governing financial bodies.
When a company initially starts out, they may rely on the financial oversight of a single owner or partner. If the business grows effectively in size and revenue, they may eventually require the in-house services of a full-time CFO. All along that path, however, the organization might actually benefit most from contracting with a fractional CFO to provide all of the financial leadership without an unnecessary drain on the company’s resources.
Knowledge, Experience & Perspective
To successfully perform the duties of a qualified CFO, this professional must exhibit a high-level understanding of all related financial pieces. So whether you’re dealing with a part-time or full-time position, the requisite standard of expertise doesn’t change. What may look a bit different, however, is the breadth of experience and angle of perspective that each one brings to the table.
Full-time CFOs likely have more intimate knowledge of the inner workings of the company itself. They are immersed in the culture and operations on a 9-to-5 basis, so it makes sense they’d have this perspective. Their full focus is on one company, the business under which they are employed.
That said, a part-time or fractional CFO has the benefit of an outside perspective and more dynamic experience. They serve a range of clients, which gives them the opportunity to see what is and isn’t successful in a multitude of settings and scenarios. If they work for a financial services firm, they also bring the combined knowledge and resources of an entire network of people.
Ultimately, making the decision between a full-time CFO and a part-time or fractional CFO comes down to comprehending all of these differences in the context of your organization’s unique needs. As you and/or the leadership team work to maintain the financial health of the company and adopt smart approaches to achieving business success, be sure to take these nuances into account. There’s simply no substitute for the concerted effort of prioritizing your business’s financial future.