Managing Your Fractional CFO: The Essential Dos and Don’ts for Small Service Firm Owners

As the owner-operator of a small service firm, be it an HR consulting firm, a lead generation marketing agency, a systems integrator for tools like HubSpot and Salesforce, or any other specialized service, you understand the challenges of wearing multiple hats. One crucial aspect that often gets overlooked is financial management, especially for those without a strong financial background. Hiring an external fractional CFO can significantly bolster your financial strategy, but it’s not without its pitfalls. Many owner-operators are not fully leveraging this resource, primarily due to a lack of financial acumen, resulting in not getting their money’s worth. This post aims to guide you on effectively managing your fractional CFO, ensuring that you get the insights and support needed to grow your business. Here are 10 dos and 10 don’ts to help you maximize this partnership.

The Dos

1. Do Expect Strategic Financial Insights: Your fractional CFO should provide more than just basic financial statements; expect them to deliver strategic insights based on historical financial analysis and future forecasting.
2. Do Demand Forward-Looking Statements: A key role of your CFO is to tell you where your business is headed, not just where it has been. Insist on regular forecasts that guide your strategic decisions.
3. Do Engage in Regular Communication: Schedule regular meetings to discuss financial strategies, challenges, and opportunities. Effective communication ensures you’re both aligned on objectives and expectations.
4. Do Set Clear Goals: Work with your CFO to set specific, measurable goals for financial performance and growth. This clarity will guide their work and your expectations.
5. Do Insist on Customized Reporting: Generic financial reports won’t cut it. Your CFO should tailor reports to your business’s unique needs, providing actionable insights.
6. Do Leverage Their Network: A good CFO brings more than just financial expertise; they have a network of contacts that can benefit your business. Ask for introductions to potential employees, clients, or resources.
7. Do Focus on Cash Flow Management: Ensure your CFO prioritizes cash flow analysis and forecasting. This is vital for the survival and growth of your firm.
8. Do Utilize Their Expertise in Fundraising and Financing: If your growth strategy involves raising capital or securing loans, your CFO should play a key role in preparing for and navigating these processes.
9. Do Expect Proactive Risk Management: Your CFO should constantly scan the horizon for financial risks and provide strategies to mitigate them.
10. Do Demand Technology Utilization: Expect your CFO to leverage the latest financial technologies for efficiencies and insights, integrating tools like your CRM or PSA systems for a holistic view of your business’s financial health.

The Don’ts

1. Don’t Confuse CFO Services with Bookkeeping: If you’re paying for CFO services but only receiving bookkeeping, you’re not getting your money’s worth. Expect strategic financial management, not just transaction recording.
2. Don’t Ignore Their Advice: You’re hiring an expert for their financial acumen. Ignoring their recommendations undermines the value they bring.
3. Don’t Micromanage: Provide your CFO with the autonomy to do their job. Trust is crucial for this partnership to succeed.
4. Don’t Overlook the Importance of Culture Fit: Your CFO should align with your company’s culture and values. A mismatch can lead to friction and decreased effectiveness.
5. Don’t Expect Instant Results: Strategic financial management is a marathon, not a sprint. Be patient and allow your CFO the time to make an impact.
6. Don’t Neglect Their Development: Encourage and support ongoing education and professional development. A CFO who keeps up with financial trends and tools will bring more value to your business.
7. Don’t Underutilize Their Skills: Make sure you are leveraging the full breadth of your CFO’s expertise, from strategic planning to financial analysis and beyond.
8. Don’t Set Unrealistic Expectations: Be realistic about what can be achieved within your budget and timeframe. Align your expectations with your CFO’s capabilities.
9. Don’t Overlook Compliance: Ensure your CFO maintains a strong compliance posture, safeguarding your business against financial and legal risks.
10. Don’t Forget to Plan for Succession: Even if they’re fractional, your CFO plays a critical role. Discuss and plan for succession to ensure continuity in your financial leadership.

By adhering to these dos and don’ts, you’ll forge a more productive and strategic partnership with your fractional CFO. However, the success of this partnership also hinges on your ability to manage it effectively. If you’re finding it challenging to get the most out of your CFO services, it might be a sign that your financial acumen needs a boost. In such cases, consider hiring a firm experienced in serving boutique professional service firms. These firms understand your unique challenges and can provide the strategic guidance you need.

Furthermore, joining a community of like-minded professionals can be immensely beneficial. Collective 54’s mastermind community is tailored for owner-operators of boutique professional service firms, offering a platform to share insights, challenges, and solutions. By engaging with this community, you can enhance your financial management skills, leverage collective wisdom, and drive your business to new heights.

In conclusion, managing an external fractional CFO requires a balance of trust, clear communication, and realistic expectations. By following these guidelines, you can ensure that your partnership is not only fruitful but also instrumental in achieving your business’s strategic goals.