Dispelling Misconceptions Regarding Fractional CFOs

The gig economy has transformed the labor market in the United States and across the world. Physical labor, knowledge and skills-intensive roles, and everything in between are now sourced to external workers who bring different insights and capabilities from internal workers. More and more businesses are opening up to outsourcing knowledge roles such as customer service, accounting and finance personnel, and more. High-revenue freelancing is also growing. So the next step is outsourcing high-level finance personnel, even the C-suite finance position.

Numerous companies leverage Fractional CFOs. Small businesses needing help to get their finances in order, medium-sized enterprises seeking assistance for major projects or debt restructuring, and even larger corporations that need temporary assistance at the highest levels, Fractional CFOs are filling the niche of high-level gig-economy workers.

There is a definite niche for them, but at the same time many still have reservations regarding hiring Fractional CFOs. These often stem from misconceptions and myths regarding part time workers, exacerbated by the fact that the role of Chief Financial Officer is quite an important one that companies are reluctant to delegate to outsiders. In this article we’ll examine these myths and conceptions that stand in the way of Fractional CFOs, and refute them.

Myths Regarding Outsourcing High-Level, High-Confidentiality Roles

There are many misconceptions regarding outsourced work. It was true back when the concept was pioneered for low-level work. And the same is true for high-level, high-confidentiality roles. Even though the industry's grown and is now worth billions of dollars with millions of participants, persistent myths remain and have to be continuously dispelled. These misconceptions include:

  • Outsourced work is always cheaper than in-house, so it is also lower-quality

  • Outsourced expertise is so independent so clients/firms can leave projects entirely alone

  • Outsourcing means losing control over sensitive data and workflow

  • Hourly costs are higher than in-house labor

  • Freelancers are not loyal to their clients

The Reality of Outsourcing These Roles

While these might have morsels of truth in them, and there are definitely individual cases of such, they most certainly do not exemplify the entire field of freelancing. These examples don't even apply to most freelancers.

Yes, a Fractional CFO will come at a lower cost than a full-time one because Fractional workers serve less time than their full-time counterparts. Top-rated personnel will also charge high per-hour rates since they don't expect to work full hours. But the results will entirely depend on the type of work required and the type of freelancer hired.

For example, a small enterprise hiring a Fractional CFO to fulfill a short-term need during a fundraising round with investors will benefit from the Fractional arrangement. The labor costs will be lower overall, but this does not mean that the work quality is any lower.

Outsourcing Can Make Work More Efficient

Aside from having just less work to be done, it could also be that outsourcing makes work more efficient, leading to lower costs overall. Or the Fractional expert being employed has encountered similar projects and draws from that rich and deep well of experience to implement effective decisions, compared to an internal CFO who has only been in one or two companies.

Negotiating Longer-Term Arrangements

On the other hand, medium-sized companies that need long-term help can possibly negotiate per-hour prices if steady work is available. With added benefits like setting their own schedules, many Fractional CFOs may actually be amenable to lower per-hour costs than in-house personnel based on lifestyle benefits.

The Perks of Independence

As for independence, Fractional CFOs are not tied to hiring firms directly, but the intimate position they are in will require them to be integrated to the company in many ways, rather than remain entirely separate. They'll have to see how the business works, what makes it tick, in order to fulfill their responsibilities effectively.


©2020 by MJ Financial Services LLC.

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