Hiring a fractional Chief Financial Officer (CFO) can be a total game-changer for a lot of small and medium-sized businesses. You get financial leadership and support without breaking the bank on a full-time CFO salary and benefits. But fair warning – to really make the most out of the experience, you’ve gotta set crystal clear expectations from the get-go when bringing a fractional CFO onto your team. 

Trust me, I’ve seen it time and again – setting clear expectations avoids all sorts of headaches down the road. So let’s walk through exactly how to do it right.

Define Your Needs and Goals

Before starting your search, take time to thoroughly assess your current financial management needs and pain points. Consider what financial leadership gaps exist in your company. What financial projects keep getting delayed due to lack of bandwidth? What high-level strategic financial insights are you missing? Pinpointing your problem areas will help you identify where a fractional CFO can provide the most value.

Next, define the specific goals you want to accomplish by bringing on a fractional CFO. Do you need support raising capital or debt financing? Are you hoping to improve cash flow management? Do you want to develop more financial discipline across departments? Get very clear on the tangible results you want to see. This will allow you to prioritize needs and focus the fractional CFO’s time on the most impactful initiatives.

It’s important to be realistic about what you can achieve in the timeframe of the fractional CFO engagement. A 3 to 6 month project scope focused on 2 or 3 top goals is recommended. You can always extend the engagement if more support is needed.

Create a Detailed Job Description

Now it’s time to create a detailed job description so you can effectively communicate your expectations to fractional CFO candidates.

Clearly outline the core responsibilities and duties you expect the fractional CFO to handle. These may include financial forecasting and budgeting, cash flow management, financial reporting and analysis, securing financing, driving cost reduction initiatives, and improving financial processes and controls.

Specify the experience level required for the role. This may range from 5+ years of broad financial leadership experience for an emerging small business, up to 10-15+ years and public company expertise for larger organizations. Outline specific specialized skills needed, such as SaaS metrics expertise, M&A integration experience, or strategic financial planning capabilities.

Provide details on the time commitment required and hours expected per week or month. Typical fractional CFO engagements range from 10 to 30 hours per week. Outline your scheduling expectations and be realistic about the hours needed to achieve your goals.

Establish Performance Metrics

It’s critical to establish clear performance metrics and key performance indicators (KPIs) to evaluate your fractional CFO’s impact. Tie these metrics directly to the goals you outlined for the engagement.

For example, if one goal is to improve cash flow management, track metrics like days sales outstanding (DSO), days payables outstanding (DPO), and cash conversion cycle time. If raising capital is a priority, set targets for capital raised within a specific timeframe.

Set clear benchmarks that indicate success for each metric. Provide context on where your current performance falls in relation to the target benchmarks you want to achieve.

Outline the process for regular check-ins, progress reviews, and reporting. Setting expectations upfront on cadence prevents misaligned assumptions. Monthly or quarterly reviews are typically recommended.

Communication and Availability 

Seamless communication and adequate availability is essential for an effective fractional CFO engagement. Be very clear on your expectations in this area upfront.

Specify expected email and phone/video call response times, such as within 24 business hours. Response times for more urgent requests, such as during time-sensitive deals or crises, should also be discussed.

Outline expectations on meeting attendance. For example, you may want your fractional CFO to plan to attend your monthly financial review and quarterly board meetings. Be reasonable regarding daily or weekly meeting demands on their time.

Agree upon preferred communication methods and tools. Using cloud-based financial systems and tools like video chat and project management software can streamline collaboration. Provide access and training as needed.

Discuss any required in-person time in your office. Some on site time can help build relationships and provide hands-on support. Be mindful of additional travel time required.

Define the Engagement Terms

Nailing down the engagement terms early prevents misunderstandings down the line. Be explicit about the following:

Length of the agreement – Typical fractional CFO engagements last 3, 6, or 12 months. You can include a trial period of 1-2 months. Having an end date allows you to evaluate if the engagement is working before committing long term.

Process for terminating the engagement – Outline notice periods required from both parties to terminate the engagement (such as 30 days notice).

Hourly rate or monthly retainer amount – Ensure rate aligns with the fractional CFO’s experience level and your budget. Paying by retainer instead of hourly can help incentivize the CFO to efficiently achieve goals.

Payment methods and billable expenses – Will you pay by invoice, credit card, or ACH? Discuss how expenses like travel will be handled.

Being transparent on fees and billing upfront avoids difficult conversations later. Discuss any flexibility on rates for a long-term agreement.

Set Your Fractional CFO Up for Success

Bringing an experienced fractional CFO onto your leadership team on a project basis provides immense value. Following the steps above will help you maximize results and return on investment.

Defining your financial needs, goals, required skills and experience, performance metrics, time commitments, and engagement terms sets clear expectations. Your fractional CFO can then hit the ground running on the highest priorities rather than spending time clarifying roles.

With alignment and understanding in place from day one, you’ll be positioned to achieve the financial leadership goals that are critical to taking your business to the next level. With a thoughtful approach on the front end, your fractional CFO engagement will be set up for maximum impact.