In today's rapidly changing business environment, companies need "more strategic financial leadership and insight," Xero senior enterprise advisor and CPA Jarrod Randall told CFO Dive.

For small and medium-sized businesses, one way to gain this insight may be to hire a fractional CFO—a financial leader who works with the company on a part-time or freelance basis. Such leaders can take over accounting and finance functions while also helping small and medium entities develop action plans for future goals: this is especially important for SMBs, as they often have "many goals that can't be written down on paper," Randall said in the interview.

"Tell your fractional CFO about the goals that aren't on your financial statements," he advised SMB leaders. "'We want to pass the business down to the family, or we want to exit,' or whatever the goal is, then the fractional CFO can say, 'Oh, great, I can help you achieve that.'"

Goal-oriented financial management

Over the past few years, the popularity of fractional CFOs has risen as companies and finance professionals began to think about new ways of working and the demand for skills amid continuously accelerating change. Last year,demand for interim talentsurged threefold compared to 2020 levels, CFO Dive previously reported, citing a report from Business Talent Group.

Fractional CFOs can bring flexible financial expertise to smaller entities: but small business owners should not be afraid to be "candid" with a fractional CFO about problem areas or challenges, Randall said. The financial leader's primary goal when entering a business is to "make an impact and provide value... but you have to be able to say, 'Hey, this is how we've done things so far, and this is where we want to get to,'" he said.

Randall's role at Xero allows him to see the accounting industry and the SMB space from a "broad perspective," he said. Xero is an accounting software provider; Randall has held his current position since May and first joined the New Zealand-based company in 2021 as a sales solutions consultant (vertical industries and franchises), according to his LinkedIn profile. His past roles include serving as director of strategic operations at Health: ELT and holding several positions at health services provider Cigna, including five years as a senior auditor.

The goal-oriented approach of a fractional CFO can also be a significant advantage for businesses. For many SMBs, their first encounter with an accountant or finance professional is often during tax filing, but the drive to hire a fractional CFO stems from SMBs feeling the need to go "beyond tax," Randall said. "That is, 'How do I make my business profitable?'"

"That conversation can start with the business owner talking to their existing accountant, saying, 'Hey, we have these questions about where the business is going, and we really need some support,'" he said.

On the CFO side, one benefit of offering fractional services is that they can devote their full attention to the specific issue or goal the business needs—and they can achieve that goal "faster and better than someone who is bogged down with a lot of other responsibilities," he said.

Scaling fractional CFO work

Another area enhancing the value of fractional CFOs is the emergence of new technology. Historically, professionals interested in fractional CFO work might not have been able to work with a large number of clients, simply because they might need to be on-site at potential businesses or use legacy systems.

With AI, automation, and accounting software, financial leaders can "spend more time providing advice, keeping their heads up rather than buried in spreadsheets," Randall said. Such solutions can help make fractional CFO work more "sustainable and scalable," he said.

Finance professionals must ensure they keep up with new technological developments and their potential impact on financial reporting and other client responsibilities: "We still have a role to play, so we have to understand the new tools available," he said.

Regarding AI and the data it provides, "it always ultimately comes down to... verifying accuracy, putting it in context, and that's exactly why fractional CFOs need to do these things for clients, because they are the professionals," Randall said. "And if small business owners lack context, they will find it difficult to verify what AI tells them."

For financial leaders, "we have to be forward-thinking and hands-on, which doesn't mean blindly adopting everything and pretending it will all go smoothly," Randall said of AI. "But we have to challenge ourselves to understand it so we can fully help clients, because we are the ones in that position."