Five Key Insights from My First Year as a Fractional CFO for Small Businesses

By: Saxby Morehead

Transitioning from auditing large publicly traded companies to serving as a fractional CFO for privately owned small businesses has been an eye-opening experience. The shift has taught me invaluable lessons that not only differentiate these two worlds but also underscore the unique challenges and opportunities faced by small businesses. Here are five key insights from my first year in this new role:

1. Resource Constraints and Efficiency

In the realm of large corporations, resources are often abundant, and departments operate with significant budgets. Small businesses operate within tighter financial constraints, they do more with less people, and these people wear a lot more hats. Every dollar counts, and efficiency is paramount. As a fractional CFO for small businesses, I have learned the importance of maximizing financial resources, utilizing technology to automate and streamline processes. This approach ensures that small businesses can achieve their goals without overspending and results in maximum profits.

2. Personal Relationships and Trust

In small businesses, the relationship between the CFO and the business owner is more personal and direct. Unlike large corporations where decisions are made by committees and boards, small business owners often make decisions based on their personal goals and values. A key step for me with any new client is establishing trust and understanding the owner’s vision. I learned very early through one client that I can do a fine job with accounting but if the relationship doesn’t “click”, the quality of my work doesn’t matter. This doesn’t mean I’m friends with my clients, but they must want to speak with me and trust my recommendations. This trust allows for more effective financial guidance that aligns with both the business’ and the owner’s aspirations.

3. Flexibility and Adaptability

Small businesses thrive on their ability to pivot quickly in response to market changes and new opportunities. The larger firms I worked for were slower to respond and had the resources to “wait it out.” Providing CFO services for small business owners require a level of flexibility and adaptability that is often less prevalent in large corporations. As a fractional CFO, I’ve learned to adjust strategies and financial plans on short notice, ensuring that the business remains competitive and can capitalize on emerging opportunities.

4. Hands-On Involvement

In large companies, the CFO’s role is typically confined to financial oversight. However, in small businesses, the CFO often wears multiple hats. My role has expanded to include involvement in operations, HR, IT, and even marketing. This hands-on approach has provided me with a holistic understanding of the business, enabling me to offer more comprehensive and practical financial advice that considers all aspects of the company. While it can be frustrating having to clean up basic bookkeeping entries or re-code a couple dozen payroll entries that weren’t posted correctly, the satisfaction of helping a business owner and seeing the direct impact our CFO services have on their business makes the stress of wearing so many hats worth it.

5. Importance of Cash Flow Management

Cash flow is the lifeblood of small businesses. Unlike large corporations with substantial credit lines and reserves, small businesses rely on meticulous cash flow management to stay afloat and grow. Developing robust cash flow forecasts, monitoring inflows and outflows, and ensuring liquidity are critical tasks. Effective cash flow management allows small businesses to meet operational needs, invest in growth opportunities, and navigate financial challenges.

I now have a greater and more detailed level of involvement with my small business clients’ cash flow management needs, and it is more than anything I had experienced previously. I was strong in other areas like audit and corporate governance, so I shared those skills with the Lucrum team in exchange for a crash course in small business cash flow management.

In summary…

The transition from working with large publicly traded companies to small privately owned businesses has been a transformative experience. These five insights highlight the unique dynamics of small business finance and underscore the importance of a tailored approach. As a fractional CFO, my goal is to leverage these lessons to help small businesses thrive, ensuring they have the financial foundation needed to achieve their goals.

If you’re a small business owner looking for financial guidance that understands your unique challenges and opportunities, our CFO consulting firm is here to help. Contact us today to learn more about how we can support your business’s financial success.