When to Hire a Fractional CFO: A Practical Test

Most owners don’t wake up one day and decide they need a CFO. It creeps up. The month takes longer to close. A lender asks for a report nobody has built. Cash is tight in a month the P&L says was profitable. A raise, an acquisition or a new location is on the table, and the forecast lives in one person’s head.

A full-time CFO is often more than the company needs at that point. A fractional CFO gives you senior finance judgment on a part-time schedule. But a CFO on their own can only be as good as the books they are handed. That is why River Edge Advisors works as a fractional CFO team: a CFO, a controller and accounting staff from one CPA-led firm of 75+ people, so the bookkeeping, the close and the CFO work are run by the same group.

Use the test below to see where you stand.

Answer each question yes or no. Be honest; nobody is grading you.

1. Does your monthly close take longer than about two weeks, or does it not happen on a fixed date at all?
2. Have you made a hiring, pricing or expansion decision in the last six months without a forecast to check it against?
3. Has cash been tight in a month your P&L said was profitable?
4. Do you run more than one entity, location or property, and is it hard to see how each one is doing on its own?
5. Is a lender, investor or board asking for monthly reporting you struggle to produce on time?
6. Are you planning a raise, a refinance, an acquisition or a sale in the next 12 to 18 months?
7. Do you spend your own evenings building spreadsheets to answer basic questions about the business?
8. Does your bookkeeper record transactions, but nobody tells you what the numbers mean?
9. Would losing one finance person leave you unable to pay bills, run payroll or close the month?
10. Is your only finance relationship your tax accountant, whom you mostly hear from once a year?

How to read your score

• 0 to 2 yes: you probably don’t need a CFO yet. Make sure your books are closed and reconciled every month, and revisit this test when something changes.
• 3 to 5 yes: you are at the point where part-time CFO help pays attention to the questions that are costing you sleep. A fractional CFO, with a team keeping the books, is usually the right size.
• 6 or more yes: the gap between your decisions and your numbers is already wide. Start with a review of where the books stand today, then put a CFO and controller on a fixed monthly schedule.

Whatever your score, a good first step is the same: send us last month’s books for a free review and we’ll show you what doesn’t tie and what we’d fix first.

These three roles get mixed up all the time. They do different jobs, and most growing companies need more than one of them.

A controller makes sure the numbers are right. A CFO makes sure the numbers are used. Without a controller, a CFO spends their hours fixing reconciliations. Without a CFO, clean books sit in a drawer while decisions get made on instinct.

That is the case for hiring them together. With a fractional CFO team, the controller and accounting staff close the month on a fixed date and the CFO turns that close into a forecast, a lender package or a board report. For a deeper look at the CFO choice alone, see fractional CFO vs full-time CFO, and to compare the cost of building the same team in-house, try the finance team cost calculator.

Many owners assume their CPA already covers this. Usually they don’t, and that is not a criticism of the CPA. They are hired for a different job.

A tax CPA looks at a finished year and makes sure it is reported correctly and filed on time. A CFO looks at the months ahead and asks what the business should do with them. One works from the tax return backward; the other works from the plan forward.

• Timing: tax work is annual or quarterly. CFO work is monthly and weekly, around the close and the cash.
• Questions: your CPA asks “what did you earn?” A CFO asks “can we afford this hire, this location, this loan?”
• Outputs: a tax return and planning advice, versus a 13-week cash forecast, a budget, KPI reporting and lender or investor packages.

The two work best side by side. A fractional CFO team hands your tax accountant a clean, reconciled year, which makes their job faster too.

The same need shows up differently depending on where your company is. Here are the signs we see most often in the industries we serve.

A startup that just raised

The round closed, and now investors expect monthly reporting, a burn and runway number they can trust, and a board package each quarter. Signs it’s time: the founder still does the books at night, nobody can say how many months of runway are left without a spreadsheet session, and the next raise depends on clean financials. See accounting and fractional CFO for startups.

Multi-entity real estate

Each property or deal sits in its own LLC, and the portfolio keeps growing. Signs it’s time: intercompany balances don’t tie, investor distributions are calculated by hand, and a lender wants property-level reporting by a date you can’t hit. River Edge manages accounting and back office for 40,000+ real estate units, so this structure is familiar ground. See real estate investor accounting.

A healthcare group in growth mode

New locations, new programs and new entities arrive faster than the finance function can absorb them. Signs it’s time: the close stretches for weeks, and you can’t see margin by location or program until it’s too late to act. In one engagement, a multi-entity healthcare group’s 12-entity monthly close went from six weeks to ten days. Read the case study or see fractional CFO for healthcare.

A lender with reporting obligations

Specialty and alternative lenders answer to their own capital providers. Signs it’s time: the loan tape and the general ledger disagree, borrowing-base reports are assembled in a rush each month, and one person holds the whole process together. For one alternative finance lender, we reconcile about 180 loans every month and prepare monthly borrowing-base reporting. Read the case study or see alternative lender accounting.

A fractional CFO team should make a visible difference in its first quarter. Here is what a sensible first 90 days look like.

Days 1 to 30: get the books right

• Review the current books, bank and credit card reconciliations, and open balances.
• Fix what doesn’t tie, and agree on a chart of accounts that fits how you run the business.
• Set a fixed close date and a monthly calendar for payables, payroll and reporting.

Days 31 to 60: build the forward view

• Build a rolling cash forecast and a budget for the rest of the year.
• Set up the handful of KPIs that matter in your industry, such as margin by location, property or customer.
• Map what lenders, investors or a board need from you, and when.

Days 61 to 90: run it like a finance department

• Deliver a monthly reporting package with commentary, not just statements.
• Hold a monthly review with the owner: what changed, what it means, and what to decide.
• Plan for what’s coming, whether that is a raise, a refinance, a new entity or a sale.

Because the CFO, controller and accounting staff are one team, these steps happen in parallel rather than waiting for one person to finish the bookkeeping before the strategy can start.

Four engagements show what the team approach changes:

• Healthcare group: a 12-entity monthly close cut from 6 weeks to 10 days. Case study
• Logistics company: margin up 9 points. Case study
• Alternative finance lender: about 180 loans reconciled monthly, plus monthly borrowing-base reporting. Case study
• SPV: accounting and reporting with zero internal finance hires. Case study

If you scored three or more on the test, the next step is simple. Request a free review of last month’s books. We’ll walk you through what doesn’t tie, what’s behind and what we’d fix first. No obligation either way.