TrueValue M&A Network

Fractional CFOs

A part-time finance director who brings the discipline of a full-time one: the management information a buyer needs to run the business from day one, the covenant reporting the lender requires, and the financial control an owner-managed business often lacked.

Fractional CFOs

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What fractional cfos do

Before completion a fractional CFO can support the buyer’s side of diligence, build the operating model and the first-year budget, and set up the reporting the lender and the investors will want. After completion they run the finance function — monthly management accounts, cash forecasting, covenant compliance, the working capital true-up, the earn-out measurement — for one or two days a week, until the business justifies a full-time hire or no longer needs one.

Acquired businesses frequently lose their bookkeeper or their owner’s informal control at completion. A fractional CFO is the bridge.

When to engage them

Before completion, so the first month’s numbers are produced properly and the covenant and earn-out reporting exist from day one. Retrofitting reporting after a lender has asked for it is expensive and reflects badly.

Usually active at

  • In due diligence
  • Legal documents and completion
  • Completed

What they typically help with

  • The operating model and first-year budget
  • Monthly management accounts and cash forecasting
  • Covenant reporting and lender relations
  • Working capital true-up and earn-out measurement
  • Building the finance function for the next stage

Questions to ask before you engage

  1. 1. Have you run finance in a business immediately after an acquisition, with a lender and an earn-out to report on?
  2. 2. How many days a month, at what rate, and for how long do you expect to be needed?
  3. 3. What systems do you work with, and will you set up the reporting or use what exists?
  4. 4. What sector experience do you have at this size?
  5. 5. How do you hand over to a full-time finance director when the time comes?

How fractional cfos are paid

Day rates or monthly retainers for an agreed number of days, usually without a long notice period. Project fees for defined pieces of work — the operating model, a systems implementation — are also common.

How TrueValue fits alongside

TrueValue’s post-completion record in the deal workspace holds the earn-out (with its contract-linked forecast), the escrow, the working capital peg and its true-up, and the side-letter obligations with their dates, so the fractional CFO and the buyer measure the same numbers against the same agreement.

Frequently asked

What is the difference between a fractional CFO and an accountant?

An accountant produces the statutory accounts and advises on tax and compliance. A fractional CFO runs the finance function inside the business — management information, cash, controls, the board pack — and is part of the management team.

How much time does an acquired business need?

It varies with size and complexity. The months around completion and the first year-end are the heaviest; many engagements start at two or three days a week and reduce.

Can a fractional CFO help before I buy?

Yes: building the operating model, testing the seller’s forecasts, setting up the reporting and supporting financial due diligence are all pre-completion work a good one will do.

Listings in the TrueValue M&A Network are provided for information. A listing is not an endorsement or a recommendation, and TrueValue does not guarantee any professional’s performance. You must carry out your own due diligence before engaging anyone, verify regulated status independently with the relevant regulator, and seek qualified legal, financial and tax advice where appropriate.