The journey from being an FP&A professional to fractional CFO is becoming a sought-after career path in today's fast-paced business world. This transition taps into a growing need for flexible and strategic financial leadership in companies of all sizes.

As businesses face new challenges and opportunities, the role of a CFO evolves, demanding not just financial acumen but also strategic foresight and adaptability.

Tom Schultz, founder and CFO of NextGen CFO and author of "So You Want To Be A Fractional CFO," brings valuable insights into this shift. His expertise highlights how FP&A professionals can expand their roles to meet the increasing demands of the modern business landscape.

In this article, we will explore the core skills and strategies that make an effective FP&A professional, the impact of new technologies on the field, and how these factors integrate into the role of a fractional CFO.

Drawing on Schultz's experiences, we'll discuss how embracing a broader understanding of finance helps professionals transition successfully. Moreover, we will learn the essential steps and challenges in moving from an FP&A professional to a fractional CFO, preparing them to navigate and succeed in this dynamic role.

Essential Qualities of an Effective FP&A Professional

Effective FP&A professionals excel in handling numbers and interpreting what these numbers signify about real-world events and prospects.

Here are the key attributes and roles of a competent FP&A professional:

• Understanding Beyond Numbers: It's crucial to grasp the story behind the data, not just the figures themselves.

• Forecasting and Modeling: The ability to project future trends based on current data is essential for strategic planning.

Impact of Technological Advances on FP&A

Advancements in technology, particularly introducing prebuilt dashboards and artificial intelligence, are transforming FP&A practices. These tools can automate many traditional tasks, which presents both opportunities and challenges:

• Efficiency Gains: Automated tools can enhance efficiency, allowing FP&A professionals to focus on more strategic aspects.

• Potential Skill Gaps: There is a concern that newer professionals might rely too heavily on technology without fully understanding the underlying financial principles.

Personal Insights from Tom Schultz as an Experienced CFO

Tom Schultz shares his extensive experience in the field, highlighting how his career evolved and how he transitioned into fractional CFO work. His journey underscores the diverse opportunities in the finance sector and the adaptability required to succeed:

• Career Evolution: Schultz's career growth from managing a small company to engaging in international joint ventures illustrates the dynamic nature of finance roles.

• Fractional CFO Role: Starting as a part-time role, fractional CFO work allowed Schultz to apply his skills across various industries, demonstrating the flexibility and demand for financial expertise in different business contexts.

This shift towards fractional roles reflects broader trends in employment, emphasizing versatility and specialized expertise in today's job market.

Transitioning from FP&A Professional to Fractional CFO

Many FP&A professionals possess the foundational skills necessary for the CFO role, given their forecasting and strategic financial planning expertise. This forward-looking perspective aligns well with the CFO's focus on guiding future financial paths rather than merely reviewing past data.

FP&A professionals are adept at financial modeling and budget forecasts, which are critical for any CFO. These skills enable them to anticipate and effectively plan for future financial scenarios, a core responsibility of CFOs.

However, to excel as a fractional CFO, one must also embrace a broader scope of financial management. This includes a solid understanding of accounting practices, banking relations, insurance, and even human resources.

Bridging the Skill Gap

Transitioning to a fractional CFO requires more than just financial acumen; it demands practical experience managing diverse business operations.

Starting as a controller can offer invaluable insights into the daily workings of a company's finances, providing a practical bridge to the more comprehensive responsibilities of a CFO.

Practical Steps for Aspiring Fractional CFOs

For FP&A professionals looking to become fractional CFOs, several practical steps can smooth the transition:

1. Educational Resources: Engaging with online courses and certifications can enhance one's financial leadership skills.

2. Mentorship Opportunities: Joining a firm that offers fractional CFO services can provide mentorship, allowing newcomers to learn from experienced professionals and gradually take on more responsibilities.

3. Starting Small: Initially, handling smaller clients or part-time roles can help build the confidence and skills necessary to manage larger, more complex financial operations.

Overcoming Challenges

Becoming a fractional CFO involves certain challenges, including financial stability and client management. New entrants to the field should ensure they have sufficient financial reserves to support themselves during the initial phase, where income might be unpredictable.

Furthermore, effective client management skills are crucial, as fractional CFOs often need to clean up financial messes and establish robust financial practices swiftly.

By methodically enhancing their capabilities and strategically gaining relevant experiences, FP&A professionals can successfully leap to becoming skilled fractional CFOs, fully prepared to handle the dynamic demands of this role.

The Role Overlap When Transitioning From FP&A Professional to Fractional CFO

Transitioning from an FP&A professional to a fractional CFO often involves addressing existing gaps in client service and understanding the overlap in roles that might lead to inefficiencies or dissatisfaction.

Occasionally, companies that have previously hired fractional CFOs or sought FP&A support are dissatisfied with the level of service received. This dissatisfaction often stems from staffing issues rather than a lack of expertise.

For instance, a CFO might be overburdened with tasks better suited for a controller or a clerical staff member, preventing them from focusing on strategic CFO-level responsibilities.

To resolve these issues, restructuring the finance department to align roles and responsibilities can significantly enhance service delivery, allowing CFOs to focus on higher-level tasks.

Leading Budgeting Initiatives

A key responsibility for fractional CFOs, especially when stepping into organizations without robust financial planning processes, is leading budgeting initiatives. This role can vary significantly depending on the existing financial structure of the company:

• For Companies with Established Processes: If a competent controller is in place, a fractional CFO may play a minimal role in the budgeting process, focusing instead on high-level strategic oversight and guidance.

• For Companies New to Budgeting: In organizations without a formal budgeting process, the fractional CFO often takes a leading role in introducing and managing the budget. This involves educating senior leaders and department heads on the benefits and techniques of effective budgeting, which can be challenging but crucial for long-term planning.

Integrating into Business Operations

To be effective, fractional CFOs need to integrate closely with the businesses they serve, functioning as trusted advisors to the CEO and senior leaders. This integration involves:

• Providing Timely Financial Insights: Responding quickly to financial queries from various departments and offering actionable advice.

• Forward-Looking Financial Strategy: Consistently focusing on the future, helping the company anticipate changes and adapt strategies accordingly.

Challenges in Hiring Fractional CFOs

Many companies, especially privately held ones, are slow to recognize the value of hiring a fractional CFO. This hesitation often arises from a lack of understanding of the role's potential benefits.

The hiring decision typically follows a triggering event, such as financial distress or hearing peer success stories. These experiences underscore the importance of fractional CFOs in navigating complex financial landscapes and securing the company's financial future.

Rapid-Fire Insights from Tom Schultz on FP&A and Fractional CFO Roles

In this rapid-fire section, Tom Schultz shares his preferences and insights on tools, industry support, and effective strategies for FP&A professionals transitioning to fractional CFOs.

1. Preferred Tools for Financial Analysis

When asked about his preference between Google Sheets and Excel, Tom opts for Excel, citing familiarity and industry adoption, particularly noting that none of his clients use Google Sheets. This choice underscores the importance of using robust and widely-accepted tools in financial analysis.

2. Industry Focus

Tom primarily supports established firms in manufacturing and distribution, steering clear of early-stage and pre-revenue companies. This focus reflects established businesses' complex financial needs, which require seasoned financial oversight.

3. Planning Platforms and ERP Systems

Regarding planning platforms, Tom adapts to the existing systems of his clients. He mentions using Excel for flexibility but also integrates with client-owned ERP systems, such as Microsoft Dynamics and Power BI, to leverage their capabilities.

This adaptability is crucial for fractional CFOs working within diverse technological environments across clients.

4. The Role of ERP in Different Scales of Business

Tom observes various ERP systems in use among his clients, from widely known solutions like QuickBooks and Microsoft Dynamics to specialized systems designed for specific industries, such as forklift companies. His experience highlights the importance of choosing the right ERP system that scales with the company's size and industry requirements.

5. Use of Generative AI

Although not widely adopted in his group, Tom uses generative AI tools like ChatGPT for tasks such as writing and streamlining job descriptions. This application illustrates the growing relevance of AI in enhancing administrative efficiency and supporting strategic tasks.

6. Essential Skills for FP&A Professionals

When considering the most crucial skills for FP&A professionals, Tom emphasizes the mastery of spreadsheets and the importance of interpersonal skills. He advocates for FP&A professionals to engage directly with various business units to understand the business beyond the numbers better.

7. Building Effective Business Partnerships

Tom advises FP&A professionals to actively engage with team members across the organization to be effective business partners. He used to carry atomic fireballs as a conversation starter, a creative method to foster relationships and gather insights during informal interactions.

Conclusion

In conclusion, Transitioning from an FP&A professional to a fractional CFO is a strategic career move that taps into deep financial knowledge and broad business understanding. Tom Schultz's experience highlights that this journey involves more than just understanding numbers.

It requires mastering financial tools like Excel, adapting to various ERP systems, and using generative AI for efficiency. Effective interpersonal skills are also crucial. Engaging with different departments helps fractional CFOs understand unique challenges and influence strategic decisions.

This interaction ensures financial strategies are well-integrated across the company, leading to better overall management. The role of a fractional CFO is becoming increasingly important as businesses recognize the need for skilled professionals who can navigate financial complexities and lead strategic initiatives.

For FP&A professionals looking to step into this role, it means changing their job title and significantly expanding their influence within the business landscape. This transition is not only a personal growth opportunity but also a chance to impact business operations and success substantially.

FAQs

What are the key differences between a full-time CFO and a fractional CFO?

A full-time CFO is employed exclusively by one company, managing all financial aspects. A fractional CFO provides high-level financial strategy and guidance to multiple smaller companies on a part-time or contractual basis.

What role does technology play in the transition from FP&A Professional to fractional CFO?

Technological proficiency in financial modeling, ERP systems, and data analysis tools is essential. These skills help in delivering efficient and accurate financial insights across various platforms.

How long does it typically take to transition from an FP&A professional to a fractional CFO?

The transition period can vary widely depending on individual experience, industry knowledge, and access to mentorship. It usually takes several years of strategic career development and networking.

Can a professional transition directly from an FP&A to a fractional CFO role?

Direct transition is uncommon; usually, stepping into roles such as Controller or Corporate CFO first provides the necessary experience in managing broader financial operations before moving to a fractional role.