Differences Between Fractional CFOs, Outsourced CFOs, and Interim CFOs (and How to Hire One)

CFO Services — What Does a CFO Do?

CFO stands for chief financial officer. The “chief” in the title represents an important corporate title within a company. They play a crucial role as an executive, responsible for the finances of a business. They have a wide range of roles, all relating to finances, including analyzing finances, preparing financial statements, monitoring expenses, and helping businesses make smart financial decisions.

There are many different chief positions that have corporate titles, including:

There is a hierarchy of titles within a business, and the CFO is very near to the top. CFOs are so important that they place 3rd in the hierarchy of chief business titles.

The salary of a CFO ranges considerably depending on the experience of the CFO and the industry they are working in. CFOs can be paid anywhere from $100,000 - $500,000 per year or higher for sought-after positions.

What is a Fractional CFO?

A fractional CFO only works part-time. Although they aren't a full-time fixture in the company, they still play an important role in guiding the finances and financial decisions of a business.

Fractional CFO services are ideal for businesses that want the executive guidance of a CFO but aren’t large enough to hire someone full-time. A part-time CFO is an investment in the financial future of a company. They may continue to work part-time, or their role may expand to full-time as the business and their responsibilities grow.

Fractional financial services are often sought-after by small businesses and startups that don’t yet have the capital to hire a CFO outright. A fractional CFO can be virtual depending on the needs of the business and the availability of the CFO you choose to hire.

What is an Outsourced CFO?

Outsourced CFO services are hired outside of your company. CFO outsourcing can be an advantage because the role is filled by a contractor instead of an employee.

Contract CFOs are more likely to take on part-time or fractional roles than employees, who are often looking for full-time work. When hiring contractors, employers aren’t required to cover taxes, health care, or vacation pay.

An outsourced CFO could be a fractional one if they only complete work for your business on a part-time basis. You could also have an outsourced interim CFO if you only hire their services for a short portion of time, and any of those combinations could be virtual if the CFO completes work virtually rather than in your physical office.

What is an Interim CFO?

An interim CFO, or temporary CFO, is a temporary position. This is different from a fractional CFO in that they don’t (necessarily) work part-time but rather work for a short portion of time at the business. Interim CFO services vary, but interim CFOs complete the same types of tasks as outsourced or in-house CFOs, only on a short-term basis.

The interim CFO could be full-time, part-time, outsourced, or virtual, but they are a temporary fixture. They may be brought on as a company looks for the ideal hire or to fill in for an existing CFO that needs to take time away from the company but plans to come back, such as maternity leave or a leave of absence.

What is a Virtual CFO?

A virtual CFO has the same duties as a regular CFO, only they work virtually. This could be from home, a coworking space, while traveling, or anywhere in between. They communicate and interact with teammates through online means and do not participate in in-person office interactions.

Virtual CFO services are beneficial because businesses have the ability to choose from the best of the best. When hiring a virtual CFO, you are hiring from a pool of the best talent in the world instead of the best talent that happens to live near your business’s location.

They have the freedom to choose how and where they work, which can build trust, boost morale, and increase productivity. You may also choose a hybrid remote approach, which means the CFO works partially in the physical office and partially from home/virtually. Hybrid working agreements give employees or contractors the flexibility to work where they want for a portion of their working hours while keeping them involved in the physical workplace for important meetings and team building activities.

Virtual CFO pricing is similar to an in-house CFO. They have the same credentials, experience, and job tasks—the only difference is they work virtually.

How to Hire a CFO

When looking for a CFO for your business, no matter the type, it’s good to start asking around within your own networks. Ask mentors, friends, and business peers who they have worked with in the past and what services they have used for outsourcing. Getting a recommendation from the beginning helps you find a CFO that’s already backed by a positive review from someone you know.

If you fail to find a CFO through someone you know, take your search to your social networks. You can ask for recommendations within business networks, such as industry-specific Linkedin groups.

Once you have a few options to choose from, get to know them better by asking targeted questions. It’s important that you choose a CFO who aligns with your business values and understands the direction you want to take your business.

💡 Learn about the importance of organizational fit, how to establish your company culture, and how to hire the right candidates for your business: Organizational Fit: The Importance of Culture Hiring.

Virtual CFO and CFO Consulting Services

Outsourced or contract CFO services can be hired through online networks. Below are a few options if you’re looking to hire an outsourced, interim, or virtual CFO.

💡 Interested in making a career transition and becoming a CFO or financial advisor? Learn How to Become a Virtual CFO with Xero’s guide.