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Fractional Accounting – What is it and why you Need it for Your Small Business to Thrive

As a start-up business, you typically have a skeletal staff wearing multiple hats to further your company toward growth and expansion. As such, there is almost always the inevitable question about where you can afford to spend, which usually isn’t a financial team right out the gate

As a start-up business, you typically have a skeletal staff wearing multiple hats to further your company toward growth and expansion. As such, there is almost always the inevitable question about where you can afford to spend, which usually isn’t a financial team right out the gate. For many companies, traditional, fully-staffed departments are an unnecessary expense. A fractional accounting system might be a more suitable option.

What is Fractional Accounting

Fractional accounting is a growing concept about how to manage finances for small to medium businesses. It is a cost-effective and high-value way of handling your business finances, while also gaining rich data to help guide your decisions. Thanks to the technological advances, such as cloud accounting, over recent decades, it is increasingly easier for information to be available when you need it. It also makes it accessible to many people across an organization, instead of one department or team acting as the gatekeeper for numbers, figures, and analysis.

What is a Fractional CFO?

A fractional CFO service model involves outsourcing your accounting needs to a team of professionals who can provide top-to-bottom accounting and executive-level analysis, oftentimes, at a fraction of the cost of hiring in-house to get the same level of results. The focus is to accelerate small to medium size businesses’ ability to track finances, provide analyses and reporting, and improve daily operations. Some of their duties include:

  • Alerting you of services and products that can enhance your bottom line
  • Defining metrics to help increase your cash flow
  • Define the most productive distribution channels
  • Instruct you about which marketing and advertising campaigns allow the best ROI
  • Accurately measure your sales forecasts and then compare it to prior ones
  • Do an analysis of the vendor costs and associated rise in other costs
  • Pinpoint areas of the company that are experiencing the greatest financial growth and explain why
  • Detail changes in prices to help improve profits and overall sales
  • Decipher your risks and how to diminish them
  • Introduce new technology to help your company function optimally over time

Which Businesses Can Benefit From Using a Fractional CFO?

Anyone…especially small- to mid-sized businesses who aren’t yet ready or do not need an on-staff accounting team. Often, business owners get so caught up in the day-to-day operation that they lose sight of the big-picture and neglect one of the most basic business foundations – finances.

The Advantages of Hiring a Fractional CFO

To Increase Working Capital

Working Capital is what guides a company’s means to be flexible and utilize assets. With a bookkeeping service, often, you get a readout about once a month, quarterly, or even yearly. A Fractional CFO isn’t a recording service, it is designed to make data useful and impactful. The supplied data surrounding your existing cash flow helps to strategize and forecast. That type of knowledge is useful to help guide your business decisions going forward, both small and major.

Integrate and Train Accounting Technology and Software

What types of software are you currently using and does it integrate across all of your platforms? Is your business connecting to outsourced 3rd-party applications that provide even more intelligence? How about your financial readouts, or do you even know what that is? These are all questions that a fractional CFO can walk you through. They can help to build customized reports so you get information that you need when you need it.

Fix Errors in Banking, Taxes, Etc.

There is nothing scarier than having an issue with the IRS. But most companies only worry about it once a year. A fractional CFO helps to keep your taxes and banking ongoing to handle things like selling intellectual property, mergers, or funds received from outside sources. They are there to alert you when things might be a problem before they become a significant one with the government.

Improve Vendor Price Points and Contracts

There is almost always room for negotiation if you know the facts and where you stand. A good fractional CFO will know when you should look around for better vendor rates or contracts. If you run a retail business or e-commerce site, they can help you keep a tight rein on your books and look more intently at places where you might be able to cut costs. Their goal is to make sure that you are operating at the maximum using the minimum possible.

Addressing Gaps in Bookkeeping

Conducting an audit or your bookkeeping system will often unveil anomalies and things that are incorrect in the information you have on record which is used for things like tax returns or potential theft or fraud.

Many small and medium-sized businesses get so bogged down on the daily operations that finances fall through the cracks. But where you stand financially is a very critical piece of information that you need to make decisions for the future.

At Current Accounting, we understand that you have to know where you are to decide where you need to go.

Contact us today to help us help you guide the way.