Fractional CFO VS Finance Director: Which one does your business need?

When you get to a certain size, everyone will be telling you that you need some support with the finance side of things.

Initially, that will be your accountant, who may double as a management accountant and provide you with some figures based on set parameters. Some Accountants will then offer Virtual Finance Director services and provide support there but generally fall short of offering CFO services.

And those are the levels to keep in mind when it comes to deciding which outsourced support you need:

1. Accountant
2. Management Accountant
3. Finance Director
4. Chief Financial Officer

You’ll have seen from the mini hierarchy above, the CFO sits above an FD. The key thing to remember here is that FD will work closely with and report to a CFO. This should give you an idea of the level of expertise you’re bringing in and the tasks each will be doing.

With that bit of background in place, let’s get into it.

So, what does a Finance Director (FD) do?

Think of a FD as someone who is extremely hands-on with every aspect of finance and manages the day-to-day workings to make sure that the strategy is being implemented.

They’ll generally get involved in:

• Providing finance team leadership
• Reporting on financial performance
• Advising on financial planning and strategy
• Preparing short-term forecasts and budgets
• Monitoring cashflow
• Training
• Looking at best practices and processes
• Developing policies and procedures

They work in the here and now, focusing on achieving short term goals.

That makes sense, but what does a Fractional CFO do?

The in-depth answer is in our other blog which you can see here, but to save you a click, here are some of the things they will get involved in:

• Cashflow issues
• Investment Appraisal
• Pricing reviews
• Profit margin improvement
• Bid support (value proposition)
• Board meeting attendance and support
• Scenario modelling
• Implementing new finance systems
• Budgeting
• Creating integrated financial processes

Some of these tasks are more project-based, but as a general rule, CFOs look at the very big picture, sitting on the executive board to create long-term goals and strategy. It’s high-level work that is designed to help shape the company and get involved with the really complex work.

Apart from the tasks, are there other differences?

The other main one is experience. You’d expect a CFO to have at least 20 years of experience across a number of different sectors so that they could take the best parts from other industries to help grow the company they are currently at.

Finance Directors will generally (but not always) have less, usually sitting around 10-15 years of experience and as a rule of thumb, will have a less diverse background.

Ok… but which do I need?

That depends on your goals and what you want to achieve. It also depends on what problem you need to solve.

Let’s say you’re looking to grow your turnover by 30% year on year and increase your profit by 10% year on year, for the next 5 years.

The Fractional CFO would be better for you here as these are long-term strategic goals, and you’ll need to make some tough decisions around pricing and spending. You’ll need to create scenarios to understand the impact of certain decisions. And you’ll most likely need to streamline how you work. Your budgeting will need to be spot on and you’ll need your financial data to help you make decisions.

If you’ve got a specific project that you’re working on that needs some serious knowledge to get it across the line, again a CFO is best.

If you’re after someone to come in and help with the day-to-day work and get things running smoothly, then the FD is better for you.

The lines can be a bit blurry, so it’s always worth asking. If they are good, they’ll let you know if it’s right for them. If someone comes to me asking for the hands-on approach, we’ll point them to an FD. And I know FD’s who point people to me for the high-level strategic and project work.

Still not sure which one you need? Drop me a message and I’ll point you in the right direction.