The Fractious Fractional CFO Debate

Updating a LinkedIn headline is an easy way to give yourself a promotion in CFO advisory work these days.

Practitioners say the gap between a glorified controller and a real fractional CFO has become a sore spot, with many finance leaders being accused of selling accounting services under an executive title.

Owners, many of whom come from outside finance, have their own expectations to manage, especially when they want a strategic partner at outsourced accounting rates. Defining those responsibilities upfront, experts say, gives owners a clearer way to judge whether they’re getting the leadership they expected.

Chief Responsibilities

“We need to stop selling controller services at CFO prices and stop expecting CFO leadership at controller prices,” Karl Ohlemann, principal at KSIG Advisors and a fractional CEO/CFO, told CFO Upside.

A good controller gives management financial information it can trust, but the CFO carries broader responsibility for how the business uses that information. That includes whether it can afford its growth plans and how it should finance them, Ohlemann said.

“‘Fractional’ should describe how much of a CFO’s time you’re buying, not how much CFO experience you’re getting,” he said.

That does not require one prescribed career path, he explained. What matters is whether someone’s experience prepares them for the decisions the client needs help making, including recognizing when to bring in additional expertise.

“Everyone steps into that level of responsibility for the first time,” said Ohlemann.

Mark Tranter, founder of the Fractional Finance Association, said the delivery model can obscure the underlying job. In an interview, he shared how finance executives may move between permanent positions and fractional assignments throughout their careers, but their responsibilities still need to match the assignment.

“At the core they’re CFOs or they’re controllers,” Tranter said. “It’s just the way they deliver the work.”

The overlap nowadays, he said, is substantial. Tranter said fractional CFOs serving smaller businesses often handle controller duties themselves. Cleaning up financial information can also be necessary before a CFO can assess whether the company can borrow or make an acquisition.

Ohlemann added that cleanup should serve a broader executive objective and identified that as the key difference: If producing reports is the entire engagement, the owner may need a controller or accounting manager.

Andrew Hunzicker, founder of the DOPE CFO program, a curriculum that trains accountants to serve cannabis businesses, takes a particularly firm view of the commitment required. He told CFO Upside about his preference for working deeply with two to four clients in one industry and calls the role a “full-service CFO.” He questions how much leadership someone can provide across a large roster of clients with only occasional involvement.

“If you don’t think I’m the second most valuable person at the company at any time, get rid of me,” Hunzicker said of the standard he has set with CEOs.

In cannabis, he offered the example of recognizing that a grower’s yield per plant is below expectations and bringing in a cultivation expert to investigate. That requires enough industry knowledge to recognize what the financial results are signaling.

“If your yield per plant is only a half a pound … you should really be getting three-quarters of a pound. What’s going on?” That’s something that would prompt him to bring in a grow expert, he said.

Tranter also agreed that specialization helps practitioners build their businesses. An industry focus gives referral partners a clearer understanding of whom to send their way. “If you just say I’m a fractional CFO, that could mean 1,000 different things,” he said.

Show Your Work

Omar Abed, a LinkedIn marketing consultant who works with finance professionals and wrote a guide to launching a fractional CFO business, sees the title itself becoming part of the sales pitch. “A lot of people upgraded the title before they upgraded the work,” he said in an interview.

Abed urged owners to question promises of a specific profit improvement or cash windfall before the provider has examined the business. Ohlemann similarly flagged profitability promises made without understanding how the company earns money.

“If it sounds like a lottery ticket with spreadsheets, ask more questions,” Abed said.

His advice is to seek evidence of previous results and contact the clients who can substantiate them. Ohlemann suggested asking candidates about consequential decisions they helped make, including an investment they recommended against. Owners should probe what information was missing and what happened after the recommendation.

Abed also recommended giving candidates a realistic situation from the owner’s business and listening to the questions they ask. That, he said, can help establish whether their experience translates to the assignment at hand.

That same type of scrutiny should apply once the engagement begins. Tranter described an initial 90-day progression that starts with understanding the business model and assessing the finance team. From there, the work might include a 13-week cash forecast or analysis of profitability by customer, followed by scenarios tied to management’s growth plans.

Ohlemann pointed to his experience at a construction and engineering company that needed equipment and working capital to grow. In that company role, he strengthened reporting and built rolling cash forecasts while developing lender relationships. He said the business gained access to credit facilities and bonding capacity that had previously been out of reach.

Fractional Waltz: “Building relationships with the right lending partners takes more than sending over a P&L and balance sheet,” Ohlemann said. “There’s a dance to it. A bit of a courtship.”