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A Guide for Fractional CFO to Scale the Finance Function




Contrary to common belief, many venture-backed companies lack a formal finance function until they reach the Series B stage, typically in the range of $5M to $10M in revenue and around 100 employees. Up until then, it’s common practice to outsource basic financial functions, making it an effective way to access high-caliber financial insights without the overhead of a full in-house team.


As a financial consultant in a Big 4 firm, I worked with a diverse clientele, from FP&A analysts in Fortune 500s to high-growth startup leaders. Whether guiding an established corporation or a high-energy startup, fractional CFO and FP&A services can provide strategic financial direction without committing to a full-time hire.


The Guide for Fractional CFO Across the Company Lifecycle


Below, I’ll outline how a company’s finance needs mature, breaking it down into three stages—Startup, Growth, and Maturity—and how fractional CFO and FP&A services can support each stage.


Stage 1: Startup


Timeframe: Pre-Seed through Series B

Company Size: <$10M in revenue, <75 employees

Finance Team Size: Equivalent to 1.5-2 full-time roles (Fractional CFO, bookkeeper, and financial analyst)


In the startup phase, companies benefit greatly from outsourced finance services. A fractional CFO, combined with an accounting team and payroll services, offers structure without the costs of a full finance department.


Key Outsourced Services:


  • Payroll: Ensuring timely and compliant employee and contractor payments with the aid of a payroll provider.

  • Cash Management: Outsourced accounts payable (A/P), accounts receivable (A/R), and monthly bank reconciliations help maintain cash flow—critical for any early-stage business.

  • General Ledger Setup: Establishing a reliable bookkeeping system is key for recording transactions. A fractional CFO can guide startups on platforms like QuickBooks or Xero.

  • Cap Table Management: As equity distribution becomes relevant, outsourcing cap table management to a service like Carta helps simplify and secure equity allocations.


Fractional CFO Advantage: At this stage, a fractional CFO ensures essential financial tasks are handled professionally, helping prevent cash flow mishaps and building the groundwork for scalable finance functions.


Stage 2: Growth


Timeframe: Series B through Series D

Company Size: $10M to $75M in revenue, 75 to 500 employees

Finance Team Size: 3-15 people


As companies grow, the finance function must scale accordingly. This is when businesses often start to bring certain finance roles in-house, supported by fractional FP&A services.


Essential In-House and Outsourced Roles:


  • Annual Financial Planning: Developing a robust operating and hiring plan is crucial for budgeting and headcount forecasting. Fractional FP&A services can work closely with company leaders to tailor these plans to growth needs.

  • Monthly Financial Reporting: Variance analysis and P&L development across departments become necessary. A fractional CFO can provide sophisticated monthly and quarterly insights.

  • Fundraising Strategy: Leading fundraising efforts for Series C or Series D rounds can be complex; having a fractional CFO familiar with capital strategy is a game-changer.

  • Investor Relations and KPI Dashboards: Fractional CFOs can develop clear, insightful dashboards and updates that communicate key metrics to investors, board members, and other stakeholders.


Fractional CFO Advantage: By combining in-house expertise with fractional CFO services, companies can expand financial oversight cost-effectively while preparing for more substantial capital needs.


Stage 3: Maturity


Timeframe: Series D through IPO and Beyond

Company Size: $50M+ in revenue, 500+ employees

Finance Team Size: 25+ people


At this stage, the finance team becomes more complex, incorporating more specialized roles like Treasurer, VP of FP&A, and VP of Tax. The emphasis shifts to long-term financial planning, capital allocation, and preparing for a potential IPO.


Key In-House and Fractional Support Services:


  • Three to Five-Year Financial Plans: Fractional CFO services can assist with three-statement modeling and long-term free cash flow projections to align with company goals.

  • Fundraising and Capital Strategy: For companies exploring an IPO or a significant round, fractional CFOs offer strategic insights into debt/equity allocations and capital readiness.

  • Centralized Services and ERP Integration: The transition to ERP systems such as NetSuite and the centralization of services like payroll and accounts receivable ensures efficiency and alignment. A fractional CFO can support these transitions and provide ongoing financial insights.


Fractional CFO Advantage: Companies benefit from outsourcing specialized finance functions as they scale globally. Fractional services offer flexibility and expertise, reducing the overhead while maintaining high standards in financial oversight.


Final Thoughts


The finance function’s complexity evolves as a company scales, but outsourcing and fractional finance support provide a powerful alternative to an all-in-house team. For companies moving through the growth stages, having access to experienced CFO and FP&A expertise is essential for strategic decision-making, particularly when an IPO or major fundraising round is on the horizon.


A Big 4-backed fractional CFO and FP&A model empowers businesses to scale their finance operations without losing control or clarity—helping startup leaders focus on growth while keeping financial health top of mind.

 
 
 

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