The Fractional CFO is Altering Future Finance Paradigms

Just like other industries, the world of finance has been rocked by digital disruption and shifting business models. Everything from the rise of blockchain technology to the increasing importance of robo-advisors has led entrepreneurs and companies to question the “way things are done” in their work. Future finance trends are rapidly changing with the advent of applied intelligence, the gig economy workforce, and customer hyper-personalization expectations. 

While the trends above get a good amount of traction, there is another transformational trend in finance that has caught my eye. That trend is the rise of the fractional CFO. Also called an interim CFO, a fractional CFO is essentially a part-time CFO that is hired on a project or time basis. He or she can provide a wealth of expertise and knowledge—all at a fraction of the cost and be hired at point of need.

Is this the future of finance leadership?

The Fractional CFO is an Entrepreneur Model for Talent Acquisition

From startups looking for experienced financial help to larger companies who need a particular set of skills from a CFO, the fractional CFO is challenging old practices. In effect, I believe there are plenty of similarities to gig economy workers, where talented CFOs create a personal brand, specialize in one (or several areas), and offer an immense amount of value on an ad hoc basis. This is a significant change that will present plenty of opportunities for companies and interim CFOs to create mutual value.

The rise of the fractional CFO represents the culmination of shifting attitudes about how financial work should be done. In the old days, CFOs were lifers at their companies. They rose through the ranks, working in their company’s finance department before being promoted to CFO. From there, they would stay in their position until retirement.

I’m not alone in seeing that the world has changed. The interim CFO allows skilled CFOs to become more entrepreneurial with their careers. As an interim CFO, they can make a name for themselves outside the four corners of industries and roles that cause burn-out and stress. Doing this, they become their own brands—in essence their own entrepreneurial business, especially if they do stellar work for their clients. 

Leveraging Future Finance Advice On-Demand

For companies, there are a significant number of benefits from interim CFO services. For example, startups can access an extremely talented and experienced CFO at a fraction of the cost. For the most part, startups often have trouble hiring experienced, grizzled talent. This talent often opts for more security and seeks compensation that is higher than what the cash-poor startup can afford. The game changes, however, with the introduction of fractional CFO services. Whether the startup needs help with working capital management or to prepare for an upcoming financing round, an interim CFO can get the job done.

The versatility and gig-like nature of fractional CFOs also helps larger companies. Interim CFOs are often seen as a compelling short-term option on certain projects or initiatives. I’ve seen it myself. The interim CFO can not only help with these discrete projects, but she can leverage her experience to generate new ideas for the company. This collision of ideas from different domains or experiences is vital for the birth of new ideas, allowing fractional CFOs to add even more value. 

Changing the Future of Finance

Ultimately, I firmly believe that the future of finance will involve more fractional CFOs that provide value to a whole host of companies. The incentives are clearly there for both companies and interim CFOs. Whether companies have an urgent need for a CFO or are simply looking for more ad hoc help for a certain period, interim CFOs can fit the bill. 

We are living in a world where it is much easier to work for ourselves. Determining a unique edge and incorporating it in our day-to-day work helps us build a competitive advantage, making it difficult for our rivals to compete. This is a compelling message for the long-term CFO or finance professional who is looking for more ownership over her career. She can use the skills she already has and work for a wide range of companies that interest her. 

Granted, we aren’t going to see fractional CFOs become a majority of the CFO population overnight. Full-time CFOs certainly have their role. But, the sift to factional executives is a growing trend that is gaining momentum.

Nonetheless, I firmly believe that interim CFOs are going to change the conversation. Companies will be looking more closely at how their full-time CFO is adding value to the organization. More full-time CFOs are going to consider going out on their own. And companies who wouldn’t normally be able to hire an experienced CFO will be able to do so. 

Overall, it is a healthy, exciting, and fascinating future in the world of finance. I can’t wait to see what happens next. 

———————

OVESTO is a leader in providing fractional and interim senior executives on-demand for future finance needs. If you would like to learn more about our Fractional CFO services. either contact me directly or click here.