How Typical Fractional CFOs Waste Client’s Money

This can be a provocative claim for the current fractional CFO market, especially coming from someone who’s been a fractional CFO for several years. But it takes insiders to really“know where the bodies are buried.”

SaaS Gurus Fractional CFO Services vs. Typical Part Time CFO

The fact is that what many fractional CFOs do is not finance, it’s accounting. Specifically what accounting does is:

  • Collects the data from the various sources
  • Classifies data in the accounting system
  • Produces financial reports, KPIs, metrics
  • Completing actual versus budget comparisons

All the above is accounting and does not require the skills of a CFO to do. Not only that, most the above is still done “by hand” with people typing in data on a computer. That is totally 20th century! We instead design systems where the numbers come out easily, data entry is automated, and in the end doesn’t require a CFO to produce them. That’s where we see a lot of waste in the market — fractional CFOs are doing too much accounting work and they’re not doing finance. With the tools SaaS Gurus provides and the approach we take, those accounting processes become highly automated allowing our CFOs to focus on financial strategy and reducing the monthly cost for our clients.

Not all Fractional CFOs are the same, and the way SaaS Gurus looks at CFO work is different from a lot of companies. The first thing is that we want to make sure that whatever advice we’re giving our clients is SaaS specific. We work only with SaaS companies especially those that are venture-backed, either VC or PE or Angel. So our advice is specifically tailored to the SaaS industry, whether it’s strategic or tactical finance.

Second, if a fractional CFO come from primarily an accounting background, they’re probably spending too much time on the accounting function and not enough on what is truly finance such as SaaS sales forecasting. That’s because it’s what they know. Accounting is not finance! Finance is forward looking, anticipatory, strategic. Accounting is historical, focused on analyzing what already happened, and tactical.

Third, a lot of fractional CFOs may not know SaaS in particular. Instead, they know another industry. So while those fractional CFOs may come up with a solution that’s close, it’s not going to be totally dialed into SaaS so they’re going to build in inefficiencies and imprecision from there.

What About Fractional CFOs that Outsource Accounting?

Outsourcing accounting separately from the CFO work is the wrong approach. If a CFO comes primarily from a finance background, they may be focusing properly on the strategic details, but they don’t have the in-depth knowledge of how to make the back office truly hum. They either leave it to others to take care of it or they outsource it. Not only that, if they are not exact and specific on how to set up the accounting for SaaS they run the risk of not knowing exactly how the accounting engine is running and could miss key details leading to faulty recommendations.

With outsourcing, you run into the same issues as with a traditional CPA firm or a traditional accounting firm, only worse because they’re viewing it purely from an accounting standpoint. They’re not looking at an analysis and have a one size fits all process.

I can’t tell you how many times I’ve looked at a client’s P&L and payroll is a one-line item. That client can’t possibly understand the cost of sales and marketing. They can’t possibly understand what their gross margin is. And they can’t possibly understand some of the most fundamental metrics to track as a SaaS company.

 

About Fractional CFO, Anthony Nitsos

Fractional CFO That Won't Waste Your MoneyWith a background in medicine, total quality management process re-engineering, IT, and finance, Anthony’s unique professional experience has shaped his professional approach into a disciplined, rigorous, and scientific approach focused on maximum efficiency, minimum cost, and strategic outcomes. He believes treating the symptoms and not root causes is just as big a miss in commerce as it is in medicine. Anthony Founded SaaS Gurus from his years of experience building B2B SaaS finance and admin ecosystems for many companies including Duo Security (exit to Cisco $2.35Bn), LLamasoft (exit to Coupa $1.5Bn), and dozens of other start-ups.

Contact Anthony Nitsos to learn more about Part Time CFO Services

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