Businesses today need “more strategic financial leadership and insight because of the pace of change,” Jarrod Randall, CPA and senior enterprise partner consultant at Xero told CFO Dive.

For smaller businesses especially, a way to gain that insight may be by hiring a fractional CFO: a finance leader that works with the business on a part-time or freelance basis. Such leaders can take ownership of accounting and finance, but they can also help smaller to mid-sized entities set up a game plan for their future goals: a key benefit for SMBs, which often “have a lot of goals that don't fit on paper,” Randall said in an interview.

“Tell your fractional CFO about your goals that aren't in a financial statement,” he advised SMB leaders. “‘We want to hand this business down to the family, or we want to exit,’ or whatever [the goal is] going to be, this is where that fractional CFO can say, ‘Oh, great, I can help you with that.’”

Goal-oriented finance

Fractional CFOs have risen in popularity over the past few years as both businesses and finance professionals contemplate new ways of working, and the need for new skills, as the rate of change continues to accelerate. Last year, the demand for interim talent spiked threefold from its level in 2020, CFO Dive previously reported, citing a Business Talent Group report.

Fractional CFOs can bring flexible financial expertise to smaller entities: but, small business owners shouldn’t be afraid to tell their fractional CFOs “what’s what” when it comes to their problem areas or challenges, Randall said. The finance leader is coming in looking “first and foremost, to make an impact and to provide value…but you have to be able to say, ‘hey, this is the way we've done things to date, and this is where we want to be,” he said.

Randall in his role at Xero, which works with accounting firms to implement cloud-based solutions, has a “wide view” of the accounting profession and of the SMB sector, he said. Randall has served in his current role at Xero, an accounting software provider, since May and first joined the New Zealand-based company in 2021 as its sales solution consultant, verticals and franchise, according to his LinkedIn profile. His past roles include serving as director of strategic operations for Health: ELT, and at health provider Cigna in roles including a five-year span as its senior auditor.  

The goal-oriented approach of a fractional CFO can also be a key benefit for businesses. For many SMBs, the first time they engage an accountant or finance professional is often at tax time, but the drive to hire a fractional CFO comes when SMBs feel the need to go “beyond taxes,” Randall said. “It’s, ‘how do I make my business profitable?’”

“That conversation can start for a business owner talking to their existing accountant and saying, ‘hey, we've got these questions about where to take our business, and we really need some support,’” he said.

On the side of the CFO, one benefit of providing fractional services is that they can devote their whole focus to the one particular problem or goal the business needs — and they can deliver on that goal “faster and better than potentially, somebody that's bogged down with a ton of other responsibilities,” he said.  

Fractional CFO at scale  

Another area that is enhancing the benefit of fractional CFOs is the emergence of new technologies. A professional interested in fractional CFO work historically may not have been able to work with a larger collection of clients, simply because they may have had to be physically present within a potential business or were working with legacy systems.

With AI, automation and accounting software, finance leaders can “spend more time advising and having their head up and not [down] in the spreadsheets,” Randall said. Such solutions can help make fractional CFO work more “sustainable and scalable,” he said.

It's crucial for finance professionals to ensure they’re keeping pace with new technology developments and how those may impact financial reporting and other responsibilities for their clients: “we have a role to play still, and so we have to stay up to date on what's available,” he said.

When it comes to artificial intelligence and the data it provides, “it always comes down to…verifying the accuracy, putting it in context, and that's exactly the reason why fractional CFOs need to be there for the clients to do that for them, because they are the professionals,” Randall said.  “And it's really hard for a small business owner to verify what AI tells them if they just have no background.”

For finance leaders, “we've got to be a bit forward looking and hands on, and it doesn't mean blindly adopting everything and pretending it's going to be okay,” Randall said of AI. “But we have to challenge ourselves to understand it so that we can adequately help our clients, because we are the ones that are in the seat to do that.”