How to Attack your Operating and Business Expenses with a Fractional CFO

How to Attack your Operating and Business Expenses with a Fractional CFO

by Karl Neset

Staffing continues to be a challenge across industries, including accounting. Even if you wanted to hire a full-time CFO, executive search firm 180one warns, “The bad news is that at this point that supply is dwindling and there are fewer truly experienced modern CFOs to meet the continually rising demand for their services.”

Meanwhile, your controller is busy with day-to-day activities—not likely available to take on additional projects such as a vendor evaluation deep dive. Besides, your controller might not know the right questions to ask. Or all the red flags to look for.

Fractional Help Can Be Enough

A fractional CFO can come into your business immediately and provide specific, tailored services on a limited-time engagement. They can deliver value by putting there experience and expertise to work finding savings and efficiencies in your operations. You get a problem solver in a budget-friendly way.

A fractional CFO will look for discount opportunities. For example, you may have started small with a particular vendor, but over time your purchasing has increased. Now it may be appropriate to ask if a discount might be available. Or, perhaps the vendor will alter their payment requirements, for example offering a certain discount if you pay within 10 days.

Especially in our inflationary environment and as companies brace themselves for a potential recession, it is critical to be thoughtful about every dollar you spend. It’s natural to look toward cost-cutting, but it’s not always easy to know where to cut without creating other problems. Layoffs, for example, can leave you short-handed. You need a smart strategy that protects you from negative impacts down the road and also considers the “political” nuances that often underlie business relationships.

Assess Operating Expenses to Get Lean and Mean 

One way a fractional CFO can help you identify opportunities is by using a vendor evaluation matrix tool, or scorecard. You can find myriad examples online, some broadly applicable and some industry-specific. This self-assessment is set up in quadrants like a SWOT analysis, to help you consider each vendor according to:

  •  Your working relationship with them, whether positive or negative (one CEO we know asks himself, “Who gets under my skin?”)
  • Your financial relationship (costs)

Look for cost “creep” and ask yourself why. Are you overbuying? Maybe your needs have changed. Can you find comparable products/services for less elsewhere? Some vendors—office supplies, for instance—are easily replaceable.

Assigning vendors to quadrants may reveal one or more that are irreplaceable, for financial and/or personal reasons. On the other hand, a supplier may be revealed as not only a poor vendor but one who is hard to work with.

Small businesses often don’t realize they can perform this type of business analysis, let alone that they should be routinely assessing their vendors. And, while you can do the work yourself, it takes time and experience to uncover the deeper insights that will bring you the greatest savings.

A fractional CFO can help you use tools like this to assess where money is being spent, ultimately helping your business move focus away from areas that are not essential. 

CEOs Have to Get Tougher on Expenses

That requires detailed evaluation. You can be sure that for every issue that is “off” enough to garner attention, several others exist without getting noticed. Letting things slide can be financially deadly.

Let’s suppose your small business has $10 million in operating expenses. If hiring on a fractional CFO to assess your vendor relationships saved you just 1% or 2% or 3%, you’d save more than the cost of that fractional CFO spending one day a week with your business for an entire year. Forego the extra costs of having a c-level executive on staff full-time and go fractional instead–it is a smart way to save your business money.

That’s how valuable vendor optimization planning can be. And that’s just the beginning of the value your fractional CFO could deliver as they continue to work with you on other projects.

Be Proactive

Vendor analysis and price shopping should be an annual exercise. Cheapest isn’t always best, business relationships matter, too, so it is often a balancing act, and what’s right for one company may not be what’s best for yours. A fractional CFO brings professional expertise and an impartial eye to help you conduct the most profitable assessment and make the changes that are tailored best to your company.Full-time to too expensive? A fractional CFO may be your best solution CTA

Karl Neset

Karl Neset

Karl Neset is an accomplished professional offering over 20 years of expertise in improving organizational finance and operational processes. He serves as a solid foundation and knowledgeable advisor and manager, utilizing excellent leadership and communication skills to provide guidance and direction to executive leaders, governing boards, staff, and business partners. Karl effectively analyzes financial data, recommends improvements, executes financial tools, systems, and accounting measures that drive profitable performance, limits costs, and significantly improve overall profit margins and cash flow. He has been with Redpath and Company as Business Development Manager and Fractional CFO since 2022.