Have you heard the term ‘Fractional Finance Director/Fractional FD’ and wondered what it actually means? More importantly, should you consider taking on a Fractional Finance Director in your business?
What is a Fractional Finance Director?
A Fractional Finance Director (“FFD”) is an experienced senior finance professional who splits their time over a number of businesses. In essence, the term refers to a Finance Director who provides the same level of commitment and expertise as a full-time equivalent, but over fewer hours which costs you less money.
The concept is not new, but the term arrived relatively recently in the UK. Prior to this, the term Part Time Finance Director (“PTFD”) was more commonplace. But as one of our FFDs, Myles Arnott, explains this term was often misunderstood. People thought that because he was a PTFD he only worked part time. This couldn’t be further from the truth – with a portfolio of several fast-growing SME clients he often works much longer than a standard working week.
Another common misconception is that a Fractional FD is akin to a consultant. Someone who comes in, writes a report and suggests that you hire someone else to fix the problem. In our experience, this isn’t how FFDs sees themselves and certainly isn’t how they work. All of our Fractional Finance Directors (who go through our rigorous Assessment Process) will roll their sleeves up and dig deep into the detail. Most have great financial modelling skills and can produce scenario analysis as well as that all-important cash flow forecast.
A diverse set of skills and experience
Fractional FDs bring their diverse array of talents to a variety of businesses. They have a core set of specialised skills, such as risk management, acquisitions and disposals, restructuring, exit planning, or corporate governance. In addition, their broad range of experience will benefit your business.
By working across multiple businesses, they keep their skills up to date. They continually widen their knowledge in a broad range of sectors, industries, or businesses. A Fractional FD will provide precisely what your business needs for a specific amount of time or reason. They are an excellent option for businesses looking for top-level expertise but aren’t yet in a position to pay an additional full-time senior level salary.
In our experience, many FFD roles start as a project, addressing an immediate issue within the finance department. These could include helping with preparing your business for sale, assisting with fundraising, implementing a new ERP system or helping to improve systems and controls within the department. More often than not, this initial phase then morphs into longer ongoing relationships, where the FFD effectively becomes your “in-house” FD.
When will I need a full-time Finance Director?
Hiring a full-time Finance Director can seem expensive and potentially risky, particularly for smaller or growing businesses. The chicken and egg scenario is very pertinent here. To grow your business, you need in-depth understanding of your finances as well as detailed and bold planning for the future. In other words, you need a Finance Director. But the cost of a full-time Finance Director, particularly if you don’t yet have that growth, can seem prohibitive. Yet without one, growth will be hard to build, manage and sustain.
Hiring a Fractional FD will give you the knowledge to help you plan your growth. With that knowledge you should then be able to work out at what stage you can afford to bring in a full-time FD. What you may find, however, as many enlightened business owners do, is that the requirement for a full-time FD is often much further away than you originally thought!
Will a Fractional Finance Director help my business grow?
A good Finance Director, whether they are fractional or full-time, will help you grow your business if that is your goal. They will have the ability to confirm which activities within your business are most profitable, so you can do more of them. A great FFD will expertly identify what the key risks are associated with each of your strategies and help prepare scenario models so that you can look at various ‘what if’ scenarios. He or she will also have a good handle on working capital and cash flow management, ensuring your company stays solvent whilst pursuing your growth ambitions.
Compared to a full-time FD, a Fractional Finance Director is more flexible and cost-effective. By working with your business on a part-time or project basis, providing the same level of expertise as a full-time FD, you stand to benefit from such a senior finance expert.
And the great thing is, you don’t have to commit in the same way as you would with a permanent member of staff. As one of our clients explained “I can turn on, and turn off the tap as and when required”.
If you’d like to find out more about our Fractional FD service, then please email ffd@artemisclarke.co.uk for a free consultation.
