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A reluctance to hire a full-time CFO doesn’t necessarily signal commitment issues or immaturity on the part of a business. In many cases, it’s a matter of cost – especially for companies navigating the precarious early stanzas of the startup experience. These self-same companies also can’t afford not to have the guidance of a CFO. This is one of many dilemmas SMEs can face and the outcome can decide the fate of a business.

Enter, the fractional CFO.

Access to a set amount of CFO expertise across the month can offer a happy medium for SMEs, and it’s challenging and satisfying work for the former senior finance professionals filling these roles.

Down to business: the pros for organisations

The advantage for businesses is that what fractional CFOs lack in terms of time, they more than make up for in experience and institutional knowledge. More often than not, a fractional CFO brings two to three decades of experience to the table, much of that in the C-suite, and applies that high-level problem solving to SME challenges. No wonder, then, that from 2022 to 2023, independent consultants, Business Talent Group reported a 103% growth in the hiring of interim and fractional CFOs.

“Say, they’re a small to medium business who’d love to have the skills of a CFO,” says David Thomas CA, who runs Figure Eight Finance. “They might have a bookkeeper, but a bookkeeper just tells you what’s happening. You can get good bookkeepers as well who double as accountants, but what you want is someone who is like a business adviser.

“They can’t afford a full-time business adviser, so that’s where a role like this slots in: an expert who is an 11-out-of-10 chartered accountant. They’ve got to really know how to come in and help run, advise and strategise for a small-to-medium business.” They’ve got to really know how to come in and help run, advise and strategise for a small-to-medium business.”

Understanding the role

Thomas’s own experience is vast, stretching from Sydney’s Northern Beaches where he ran Northern Beaches Credit Union, to the public service sector, as the CEO of Lifeline Northern Beaches. On an early-morning walk, one of his friends who worked in advertising observed, ‘You know, your skills would be really good for a virtual CFO’.

This sent Thomas down a rabbit hole and, when a surfing accident impacted his mobility, he went in headfirst, launching Figure Eight Finance.

The ‘fractional CFO’ title has evolved from ‘virtual CFO’ and, in some tech circles, is gaining traction as CFOaaS (CFO as a Service). However, different clients may feel comfortable with different titles.

“We’ve picked up a new client recently and they’ve come on board because they know they have some very deep issues with their business,” says Patrick Leong CA, who offers fractional CFO services through Mondo Advisory in New Plymouth, New Zealand. “They refer to me as their business adviser and I don’t get hung up on the title, as it is about what I deliver and the value I bring to my clients.”

A different perspective

Leong started his career in auditing at Audit New Zealand and then with Deloitte, which was followed by senior commercial roles. He shuttled back from Palmerston North to Wellington, followed by a secondment across the ditch in Adelaide. Leong and his partner, Samantha Richardson CA, realised as their family grew to four, the on-the-go lifestyle was becoming difficult to manage.

“It made sense for us to either purchase a practice or set one up,” says Leong. “We decided to purchase an existing practice.

“Mondo Advisory offers the traditional services of a practice, along with advisory. The fractional CFO service forms part of advisory and is something that I enjoy. It’s diving deep into the operational elements of the business, with a strategic focus.”

The couple relishes the opportunity to work with an increasing number of different organisations, each client with their own unique challenges.

Says Leong: “Playing a part in the future of a business is exciting and differs from the standard level of service from a traditional, compliance-focused practice. A traditional practice looks in the rear-view mirror because it is tax compliance-focused. A fractional CFO is more forward-looking.”

Well-rounded expertise

“You’ve got to know the trends,” says Thomas. “Technical skills are a given but a big one – and it often goes overlooked – is application skills. You need to know the when and what. You’ve got to be a good all-rounder. For example, I’m not a tax agent but I know how to structure things for clients.

“You’ll often say, ‘Well, maybe we won’t do that this year, let’s do it next year,’ or you might consider upcoming legislation and say, ‘You might want to do this, or maybe that’.”

Soft skills are also essential for a fractional CFO, Thomas says. “A fractional CFO shouldn’t get into the trap of just working from home,” he explains. “You must be able to go out. You’ve got to be able to spot things.”

Thomas worked for many years in audit and corporate recovery services at big-tier firms, which he says adds to the practical elements that make up a good fractional CFO. “I’ve been out on-site so many times that you get to understand and pick up things.

“Any auditor will know what I mean. When you walk into the audit client, you know. Sometimes within 10 minutes. Sometimes within two minutes. You can tell whether the business is doing well or not, and what to look for.”

Working smarter

According to Leong, the fractional CFO model provides a level of nuance that many businesses need but don’t know how to define, and the scope of work can go far beyond finance. In some cases, it’s about breaking down the existing business model and rebuilding it into a more efficient, effective and profitable enterprise. The implementation of a new technology stack – for instance – can create efficiencies with workflows and automations that free up time, which can then be repurposed and sold.

This lines up with findings in The FY25 Australian CFO Report, conducted by Weel, which states that 80% of CFOs see the automation of manual processes as a key near-term priority. However, the same report indicated that only 5% of CFOs rate their current level of automation as very high.

One of Leong’s fractional CFO clients used to write long descriptions in their invoices, which took up a lot of time, especially since typing wasn’t second nature. Leong has addressed this and the invoice is now dictated, freeing up a lot of time.

“The proof is in the pudding,” says Leong. “Once you start engaging with clients, they know pretty quickly whether you have got it or not, because I think when it comes to true fractional CFO services, it is how you listen to the conversations, that’s one thing. But to me, I think what matters is how you elevate that conversation with the impact you make.”

Making it work

Offering fractional CFO services as part of your practice’s offering comes with the typical benefits and drawbacks, including the flexibility to manage your own hours.

Figure Eight Finance has clients in Vietnam and Singapore. For Thomas, the switch from singular, full-time employment has led to a departure from the conventional Australian nine-to-five, but he stresses he now works to suit international time zones and he isn’t foreign to putting in long hours on a weekend.

Leong and Richardson’s overall work hours haven’t reduced either. Instead, their time is tailored to maximise efficiency around family commitments.

“Over the summer, I started early and would pick up the kids from day care, then head to the beach for the late afternoon,” says Leong. “That’s been cool and very special. It’s all about that flexibility and being able to manage priorities.”

So, you want to be a fractional CFO…

Ask Leong what matters most in a fractional CFO and he doesn’t hesitate. “I would say the number one skill is business acumen,” he says.

This sentiment is one that Thomas agrees with. “You’ve got to have good technical skills and you’ve got to know how to apply them,” he says. “It’s not enough to be an academic type, you need to know how to apply your knowledge.”

Someone hoping to be a fractional CFO must also have a support network of other professionals to call upon, according to Thomas. The experts act as confidants and freelance help when required. “First, align yourself with a great bookkeeper,” says Thomas, “someone agile, who you get along with, and who understands your needs. Secondly, you need a good tax contact and a good legal contact. I don’t write contracts, but I often advise when one might be needed because you become more of a business adviser rather than just an accountant.”

Both Thomas and Leong agree that client trust is critical. Finally, there is a holistic element, which Leong can trace back to his lifestyle change. It transcends the clock-in, clock-off function of conventional business and emphasises getting more out of your contact with your clientele.

“You need to be present with them,” says Leong. “Being available is one thing, but actually being present is another.” 

Take away

Read Richard King’s article ‘How to Become a Virtual CFO’ here.