Everywhere you look, there are signs of economic uncertainty. Consumer confidence is down. New and shifting tariffs are causing some businesses to hold off on placing new orders, sparking fears of higher prices and lower inventory.
If you run a small or midsize business (SMB), one of your most important responsibilities is to preserve and extend your company’s cash and manage your finances well during these volatile times. And one of your best partners to help you do that is a fractional CFO.
A fractional CFO is a seasoned financial leader who provides their expertise to businesses on an as-needed basis. They bring the experience you need to create a sustainable plan for managing your cash—and even the overall management of your company’s finances—with the added benefit of saving you the costs of a full-time hire.
A Strategic Partner to Help Control Your Cash
One of the first ways a fractional CFO can bring value to your company is helping you manage your cash. For example, a fractional CFO can build a cash flow forecast to help you identify potential cash flow shortages and understand how much cash will be available for future investments.
Understanding your cash position is critical because, as fractional CFO Ken R. says, the businesses that survive tumultuous economic periods have one thing in common: enough cash reserves to weather the storm. “I can’t stress how important cash is to a small business,” says Ken. “You have very little room for errors.”
Once you have the foundational reports you need to understand your cash flow, fractional CFOs are skilled at analyzing the data and making recommendations for cash flow management, including ways to protect your liquidity.
“It’s absolutely essential to maintain liquidity during uncertain times, and that’s making sure you have enough cash on hand to operate,” says Ken. Generally, that means having enough cash to cover at least three to six months of essential operating expenses.
To help with this, a fractional CFO can forecast your cash burn rate—how fast you are spending your cash—and cash runway, or how long it will take to burn through your entire cash reserve until it’s depleted. A fractional CFO can make recommendations to help you build cash reserves, like identifying ways to reduce your operating expenses or eliminate high-interest, unproductive debt.
Importantly, taking the time to forecast your cash flow and build cash reserves doesn’t just help you weather the storm of economic uncertainty or downturns, it gives you the discipline and tools to be successful in the long run.
“Good small businesses that can [survive] a downturn, if we went back and looked through history … you’re also probably going to see that they really understood their business,” says Ken. “They had diversified customers and product and revenue streams.”
Cut Costs and Find the Dollars You’re Not Seeing
Once you have your cash foundations in place, a fractional CFO can analyze key financial data to help you make the best decisions for both cutting costs and finding new paths to revenue.
For example, a fractional CFO can:
- Identify ways to reduce headcount costs by utilizing fractional or contract labor in specific roles.
- Analyze your product lines and identify ones that are underperforming, giving you an opportunity to drive higher performance in the future.
- Review your pricing strategy, make recommendations for margins expansion and model the effect price changes would have on consumer demand.
- Help you diversify your revenue streams by finding and analyzing new markets or product lines.
And while looking for ways to cut your costs and diversify your revenue streams is critical to surviving economic downturns, Ken says you should also be on the lookout for opportunities—another benefit fractional CFOs bring to the table.
“When everyone else is running for the hills, I’m looking for ways to capitalize,” says Ken, adding, “Maybe I can buy a customer list. For larger companies, can I go get space cheap right now?”
Flexible and Scalable Support to Protect Your Bottom Line
Although it’s true that any CFO can deliver the guidance your company needs to survive economic turbulence, a fractional CFO brings the added benefit of cost savings. In fact, it’s baked into the very nature of their role.
Unlike full-time hires, fractional CFOs are flexible, cost-effective and scalable investments. For example:
- When you hire a fractional CFO, you work with them only for as long as you need their support.
- You’ll avoid the expense of a full-time executive salary, benefits and recruitment fees. You only pay for the services you need.
- Fractional CFOs are turnkey talent solutions—they’re ready to plug into your business and drive value almost immediately, without the lengthy hiring and onboarding process you can expect with a full-time hire.
And fractional CFOs don’t just support your SMB through economic turbulence. As your business grows, a fractional CFO can build the financial infrastructure you need to support that growth.
“I personally like to grow with my clients,” says Ken. “We have to get in and get our hands dirty, and I think the more you can immerse your fractional CFO into your business life … you’re just going to reap a lot more benefits.”
Tap Into Paro’s Network of Fractional CFOs
If your SMB is looking to shore up its cash reserves, plan for a variety of scenarios and outcomes, or even look for new opportunities for growth, a fractional CFO is a cost-effective solution to get the experience and skills your company needs to navigate this period of economic uncertainty.
Paro’s network of vetted, qualified fractional CFOs are ready to plug into your company and deliver value today.
Ken’s last piece of advice? Don’t wait until it’s too late to call in a fractional CFO. “The sooner you make that investment, the better off you will be,” he says.
