CFO: Keep, Outsource or Fractionalise

15th January 2024

As the corporate landscape undergoes a seismic shift, the role of the CFO finds itself at a crossroads. The discussion around outsourcing the CFO function, once a peripheral consideration, is now front and centre, with fractionalised CFOs emerging as a nuanced alternative. However, the central question remains: is delegating the CFO role, in any form, a prudent step? The traditional paradigm is being challenged by innovative possibilities, presenting businesses with three distinct paths: retaining a traditional CFO, outsourcing to specialised firms or contractors, or embracing the emerging trend of fractionalised CFOs.

The notion of outsourcing the CFO position is not new in the United States, where many companies have successfully harnessed efficiencies and cost savings. As with most things the UK has been slow to catch on, but it is now a trend which is gaining momentum, the question arises: is outsourcing the CFO role a revolutionary leap into the future or a step too far? With the looming digital transformation and the advent of Artificial Intelligence (AI), the dynamics of financial management are evolving. The pivotal question is whether technology is ready to completely revolutionise the once-sacred CFO role.

For UK small firms, the landscape of financial leadership is on the brink of a revolution. Enter the fractionalised CFO – a flexible, cost-effective, and expertise-on-demand model that acts as a Swiss Army knife for businesses. This approach allows small firms to tap into seasoned financial leaders precisely when needed, redefining cost-effectiveness, providing expertise on demand, and offering the flexibility required for thriving in dynamic business environments.

As the CFO role finds itself at a crossroads, the debate on outsourcing versus retaining in-house expertise intensifies. While a complete outsourcing of the CFO function poses risks to strategic oversight and human connection, fractionalised CFOs emerge as a nuanced alternative. This approach, viewed as a specific form of outsourcing, demands a deliberate shift in mindset. The success of fractionalised CFOs lies in integrating them seamlessly into the organisational structure, fostering collaboration, and mitigating the risks associated with externalisation.

In the face of unprecedented change, businesses must adopt a balanced and strategic approach to CFO transformation. The evolving role, influenced by technological advancements, should not lead to wholesale replacement but rather a symbiotic relationship where AI empowers CFOs to leverage unique insights and skills. The path forward is clear – embracing the benefits of technology while preserving the essential human touch that defines effective financial leadership.

As we navigate the transformative era of financial leadership in 2024, businesses are presented with a triad of options – traditional CFO, outsourced expertise, or fractionalised CFOs. Each option comes with its set of considerations, and the key lies in strategically choosing the model that aligns with the unique needs and goals of the organisation. The CFO transformation is not a one-sise-fits-all scenario; it's a nuanced journey where businesses strategically navigate the evolving landscape, ensuring a seamless blend of technology and human acumen.

The crux of the matter lies in recognising that the value proposition of a CFO goes beyond mere number crunching. The strategic melding of human acumen and technological prowess is the key to navigating this new era. The risks associated with outsourcing can be mitigated by fostering collaboration and clear communication between internal and external financial expertise. Fractionalised CFOs, when seamlessly integrated into the existing organisational structure, can become catalysts for innovation and efficiency.

In the face of unprecedented change, the future of the CFO role does not lie in wholesale replacement but in a proactive approach that embraces the strengths of both humans and technology. Artificial Intelligence, rather than supplanting the CFO, should empower them to leverage their unique insights and skills. The path forward is clear – a balanced and strategic embrace of change, where businesses harness the benefits of technology while preserving the essential human touch that defines effective financial leadership.

At 2&20, we make this mission a reality by providing comprehensive analytical services and strategic consulting that go beyond the traditional understanding of outsourcing. We not only deepen our understanding of how external CFOs can drive growth and strengthen performance, but also help our clients make informed choices that will have a meaningful impact over the long term. The strategic choice of an external CFO becomes not only a matter of savings, but also a matter of sustainability and innovation.