Key takeaways:
- A small business accountant or fractional CFO can help manage your finances if you’re not ready or able to hire a full-time financial pro.
- The right financial partner transforms your numbers into actionable business strategies.
- A financial professional can identify tax deductions without downplaying the company’s success, help build a financial safety net, and look for opportunities to scale and take on debt when necessary.
Does it feel like your business finances are more complicated than they used to be? Or like you’re wrestling with the latest numbers, when you could be focused on other areas of your business?
If you’ve outgrown basic bookkeeping software but aren’t ready for a full finance team, hiring a financial professional part-time (also known as “fractional”) might be your best option. It can transform your business operations and profitability—and you might sleep better at night.
Here are four reasons to work with a small business accountant or fractional Chief Financial Officer (CFO), so you can focus on your business and leave the financials to them.
Accountant vs. fractional CFO
There are two routes you can go when you need professional support for your finances: an accountant or a fractional CFO.
An accountant focuses on maintaining accurate financial records and compliance with accounting standards. They will often handle bookkeeping, payroll, and account reconciliation, among other aspects. You can consider using an outside accounting firm, but you can also hire an in-house accountant on a part-time basis.
A fractional CFO goes beyond accounting to focus on the strategic side of the business finances. They can take the lead on financial planning, business strategy, growth plans, and financial analysis. Often, businesses don’t have a full-time need for a CFO, so hiring a fractional CFO while they’re growing is a great starting point.
Why the right financial support matters
As your business scales, the cost of financial mistakes scales with you. A mistake that cost you hundreds of dollars in the beginning might now cost thousands, so now is the time to build your team of financial professionals in a way that sets you up for success. As you grow, they’ll already understand your business and can scale with you.
The right financial support comes with a lot of benefits. A financial professional can find deductions and opportunities to save money and can identify issues before they become problems. They’ll also support you as you build a financial safety net and scale your business.
Here are our top reasons to invest in a financial pro.
1. They find money you didn’t know you had and identify issues early
Small businesses often miss deductions that pros can easily spot. Having the right person in your corner can mean more money in your pocket. Some specific deductions that they might catch include:
- Section 179 equipment deductions
- R&D (research and development) credits for any product improvements or innovations
- Work opportunity tax credits for hiring individuals from groups that have faced barriers to employment
- Home office deductions for hybrid work or work from home policies
A good accountant takes advantage of deductions to ultimately decrease your tax liability. It’s not, however, all about reducing taxes, even though this is often how businesses measure their accountant’s effectiveness. Working with a financial professional can help you identify deductions, but they will do so without underrepresenting the company’s success.
They can also identify financial issues early, so you can remedy them before they negatively impact your business. For example, an accountant can alert you to customers with outstanding invoices and identify potential fraud within the company. They also offer compliance protection, identifying any issues early to keep you out of legal trouble with payroll taxes, contractor classifications, and multi-state obligations.
2. They help build your financial safety net before you need it
Running a small business can mean living and working in a place of uncertainty when it comes to cash flow and capital. A financial professional will work to build your financial safety net before you need it by doing some or all of the following:
- Forecast monthly cash flow to predict problems
- Identify emergency fund strategies that don’t hurt daily operations
- Set up a line of credit during good times
- Plan for seasonal revenue fluctuations
Further, they can look to the future to forecast growth and strains that growth may put on the working capital. These forecasts can position the company to take on debt at the right time. When you enlist the help of a financial professional, they’re working in the background to ensure financial safety and position you to solicit capital in the future.
3. They help scale your operations and turn numbers into strategy
For expanding businesses that need professional support but can’t afford a full finance team yet, bringing on a qualified accountant or fractional CFO provides your business with a number of advantages that include:
- Advanced bookkeeping systems for complex transactions
- Multi-location financial reporting and consolidation
- Key performance indicators specific to your business
- Financial controls that prevent errors and theft
While a skilled bookkeeper can handle these fundamentals, fractional CFOs truly shine when it comes to strategic financial analysis. They provide expanded services, including:
- Pricing analysis
- Investment ROI modeling for equipment, locations, and staff
- Product/service profitability analysis
- Break-even analysis for new ventures and/or growth opportunities
Working with a financial professional gives you more opportunity to make data-driven moves rather than lean on guesswork decisions.
4. They give you peace of mind and a competitive advantage
There are even more benefits as a financial pro gets to know your business and the relationship deepens. They’ll offer proactive problem solving solutions and reduce the number of crisis management situations. They will also position your business in the best possible light when it’s time to apply for a loan, take on investors, or sell the company at the right time. And the best part is that while they’re handling the financial complexities of your company, you can focus on the business and your goals, giving you a leg up when it comes to competition.
How to find the right accounting or fractional CFO partner
Industry experience, growth-focused thinking, and a proactive communication style are all traits of a partner you can count on. Before you hire someone, it’s important to get to know them and evaluate how they will help your business. You can start by asking these questions in the interview:
- “Do you have experience with other businesses in my industry?”
- “What’s the biggest financial win you’ve delivered for a client like me?”
- “How do you help businesses my size plan for growth?”
- “What reports will I receive and how often?”
There are also a few things you should be on the lookout for that are immediate red flags and an indicator that you should continue your search elsewhere:
- Only available during tax season
- Don’t ask insightful questions about you, your business, or your desired outcomes
- Can’t explain things in “plain English”
- No proactive communication plan
- Significantly cheaper than competitors
What this investment actually costs (and why it pays for itself)
The cost to work with an accountant or fractional CFO will vary but will often fall between $500 and $2,500 per month compared to $6,000 or more per month for a full-time finance manager. If you’re working with a firm, many offer monthly payment terms so you can avoid a large upfront cost.
Investing in a financial pro pays for itself by ensuring you don’t miss tax write-offs and helping you to avoid tax penalties. Working with an experienced professional will also help you make better decisions to increase profits and position your business positively when the time comes to seek funding or financing.
The sooner you connect with a financial professional, the sooner you’ll see the benefits
Setting up a few spreadsheets and a Quickbooks account is great when you’re just starting out, but as your business grows, so do your financial complexities. Things like tax deductions and credits get more complicated. And while bigger numbers are a great metric of success, managing larger amounts can also increase stress.
Finding the right partner isn’t just about finding a service provider. The right accountant or fractional CFO will be invested in your success and growth
When you’re ready to take this step, reach out to three business owners you respect and ask a few questions about who handles their accounts. Use these recommendations and your own research to find the best financial professional to take your business to the next level.