Have you heard the term ‘Fractional FinanceDirector or Fractional FD’ and wondered what it means? Should you consider taking on a Fractional Finance Director for your organisation or business as many companies are doing in these challenging financial times?
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What is a Fractional Finance Director?

A Fractional Finance Director (Fractional FD) is an experienced senior finance professional who splits their time over several businesses or organisations. A Fractional FD is a Finance Director who provides the same level of commitment, know how and capability as a full-time person, but over fewer hours. Which means it costs less money, the fit to your individual needs makes it more cost effective.

The concept of Fractional FDs is not new, but the term is and it has only recently become commonly used in the UK. Prior to this, the term Part Time Finance Director was more commonplace along other titles including Executive, Outsourced and Virtual Finance Directors. These job title names were often misunderstood. For example, people often thought Part Time FDs only worked part time. So a new descriptive title was needed and found; and fractional came into being.  

Another common misunderstanding is that aFractional FD is just a glorified consultant, someone who comes to visit you, writes a report and then suggests you hire someone else to fix the problem. FractionalFD’s identify issues and problems and then provide and carry out solutions.Most have great financial management skills and can produce a practical assessment report that can be understood and put into action by all.

Fractional FDs have a distinct set of skills combined with practical experience.

Fractional FDs bring their diverse array of talents to a variety of businesses. They have a core set of skills built around financial management as well as more specialist competences such as restructuring, exit planning, acquisition, disposal and external financial reporting. In addition, their broad ranging experience will benefit your business.

By working across multiple businesses, Fractional FDs keep their skills up to date and continually widen their knowledge by working 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 at a pre agreed cost. They are an excellent option for a business looking for top-level expertise who aren’t yet in a position to pay a full-time senior level salary.

In our experience, many Fractional FD roles start as a project or assignment, addressing an immediate issue within the finance area. This could include, assisting with fundraising, implementing new soft ware or a new Finance system, or helping to improve performance and controls within the business.  As a result of the successes achieved this initial phase then gets extended into a longer and closer ongoing relationships, where the project leader  becomes your Fractional FD.
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Do I need a full-time Finance Director?

Hiring a full-time Finance Director can be expensive and potentially risky, particularly for a smaller or growing businesses. To grow your business, you need an in-depth understanding of your finances as well as detailed and bold planning for the future. This is what a FinanceDirector can bring to your business. But the cost of a full-time FinanceDirector, particularly if you don’t yet have that growth, can be prohibitive. But without such an individual, growth can be hard to build, manage and sustain.

Hiring a Fractional FD will give you the ability to help plan your growth.  With that expertise at your beck and call, you should then be able to achieve your goals. It will also give you the time and space to work out at what stage you can afford to bring in a full-time FD. What you may find however, as many business owners do who go down the Fractional FD route, is that the requirement for a full-time FD is often much further away than you originally thought and can be delayed until it is more easily affordable and required.
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Can a Fractional Finance Director help my business grow?

A good Finance Director, whether fractional or full-time, will help you grow your business at the rate and to where you want. They will have the ability to confirm which activities within your business are mostprofitable, so you can do more with them. They will identify what key risks exist with each of your strategies and help prepare financial modelling so that you can look at various outcomes. They will also understand your working capitaland cash flow needs which will ensure you remain solvent whilst achieving your growth objectives.
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Is a Fractional Finance Director right for my business?

Compared to a full-time FD, a Fractional FD is often more flexible and cost-effective. By working with your business on a short time or project basis, they provide the same level of expertise as a full-timeFD. The benefits you gain from the input of a senior finance expert in the early days of your businesses growth can be immeasurable. And the big advantage is you don’t have to commit to them in the same way as you would with a permanent member of staff, they can be used as and when you need them.
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Seven advantages Fractional FDs bring to your Businesses.

1. Expertise on Demand: Fractional FDs provide specialised knowledge and skills that might not be available in-house. They can offer insights into industry financial trends, efficiencies and strategic planning. Their knowledge base is updated pretty constantly due to their multi- client and industry exposure.
2. Flexibility and Scalability: Businesses can engage Fractional FDs for specific periods of growth or on individual projects, providing flexibility and scalability in leadership resources.
3. Speedy Implementation: With their proven experience and expertise, Fractional FDs will quickly understand business challenges and implement effective strategies, reducing the learning curve or risk associated with new full-time hires.
4. Cost-Effective Leadership: For businesses, particularly SMEs, hiring a full-time executive can be a significant financial commitment. Fractional FDs provide a more affordable way to gain access to high-level proven and skilled expertise.
5. Objective Perspective: Being external to the day-to-day operations, Fractional FDs can offer unbiased, fresh perspectives on financial and operational business challenges and opportunities.
6. Reduced Appointment Risk: Making a new appointment in any business can be risky. A Fractional FD appointment can be easily terminated if it doesn’t work out. A full time FD can be more difficult to get rid of.
7. Savings on Employment Package: a Fractional FD doesn’t need a company car providing or other benefits. You don’t need to make pension contributions, provide holiday pay or any sickness pay. They don’t get a bonus or profit sharing unless it is pre-agreed or require share options. Employers NI isn’t your responsibility. These can be major savings amounting to thousands of pounds.