🔒CFOs on call: In Maine and beyond, demand grows for ‘fractional’ finance chiefs

Out of 20 people on staff at CourseStorm, an Orono-based provider of class registration and marketing software, there’s no chief financial officer.

That’s a role the startup has chosen to contract out, paying a part-time or “fractional” executive in Bangor on retainer for services from budgeting to board reports.

“We don’t need a full-time hire to manage the finances, so this is a way to get really skilled financial advice at a reasonable price,” says CEO Brian Rahill.

Besides helping develop a model to make financial projections five years into the future, the freelancer helped the company come up with a credible budget and save money by moving cash from a checking account to a higher-paying vehicle.

“Just that change actually paid for her services for the whole year,” Rahill says.

In a state where nearly 150,000 small businesses make up over 99% of the total, flexible-schedule hires offer an affordable alternative to full-time executives. Outsourcing also offers perks for larger, established firms struggling to hire amid industry-wide staffing shortages. As documented in a 2023 survey of more than 300 CFOs in the United States and United Kingdom by Alvara, a provider of tax compliance automation, some 84% reported being short-staffed in their accounting and finance departments.

Enter the growing cadre of part-time CFOs-for-hire, often starting with a single project that leads to others and in some cases a longer-term arrangement.

Incentives to outsource

While businesses around the globe have long outsourced bookkeeping and accounting jobs, filling the C-suite with temps is a more recent development that one expert chalks up to two main factors: Technology and the ability to work remotely.

“Years ago, you’d be really reluctant to hire a CFO who wasn’t in the office,” says Chris Geczy, a finance professor at the University of Pennsylvania’s Wharton School. Today with the growing volume of cloud-based office work, hiring an outside contractor is more common, even for a high-level financial role tasked with a lot more than keeping the books.

“The best CFO is not a bean counter,” he says. “You’re hiring a star player.”

Like their full-time peers, part-timers have to shoulder a range of responsibilities and sometimes have to learn a lot rapidly, he notes. He also points to a burden on in-house management to provide access to financials so the freelancer can manage disclosures of any conflicts that arise.

“You don’t lie to your doctor, you don’t lie to your lawyer, and you don’t lie to your CFO,” Geczy says. “You need to have the right system set up so they have access to the right financial information.”

Wall Street and beyond

On Wall Street and beyond, demand for part-time or interim CFOs is strong amid the job’s high turnover rate, as reflected in a global barometer by Russell Reynolds Associates, a New York-based executive search and leadership advisory firm. (Scroll down for graphs.)

In the first nine months of 2024, a total of 224 new CFOs were appointed, just shy of the same period in 2023, when 233 new CFOs were appointed. Among companies in the Standard & Poor 500, the turnover rate has risen to a three-year high of 14.4%, with 72 new appointments. Researchers attribute the upswing to a spike in turnover in the technology and industrial sectors.

CFOs on staff are also opting for shorter tenures, averaging 5.6 years so far in 2024, a five-year low. And they’re retiring at a higher rate, with 52% of outgoing CFOs retiring or moving to board roles exclusively, a five-year high. While appointments at publicly traded companies in Japan and Hong Kong were almost exclusively internal, companies listed on Western exchanges rely more heavily on external appointments, the study found.

Reasons that CFOs approaching retirement choose to leave the profession include burnout, financial security or simply deciding that retirement is the more attractive option. Some use their expertise in board roles, opening pathways for independent, part-time contractors.

C-suite in flux

In Maine, providers of part-time CFO services range from in-house divisions of large accounting firms to niche consulting firms and one- or two-person independent contractors.

While some have been doing the work for longer, many of those who experienced burnout during the pandemic have shifted away from full-time to part-time, project-based work, says Kim Rummler, a senior manager at KMA Human Resources Consulting in Falmouth.

“Fractional roles are a way to achieve flexibility, balance and the ability to still contribute to the workforce,” she says. “It’s been a way for employers to control costs, so it’s a win for both sides.”

She says demand is strong for part-time executives of all stripes, including those in charge of technology, human resources and operations and sometimes even the CEO.

“Cost is the primary driver,” she notes. “Fractional executives are more affordable than full-time executives, making them especially attractive to startups, nonprofits and small to mid-sized businesses with limited budgets.”

Besides providing interim coverage during executive searches, contract employees are ideal for project-based needs, bridging gaps during restructuring and leadership development.

For companies that go the fractional route, Rummler suggests setting clear expectations and planning for potential challenges, including tensions between part- and full-time executives. She also recommends providing clear direction “to minimize friction and maximize collaboration.”

Portland powerhouse

At Opus Consulting in Portland, President Jacques Santucci leads a three-person team (out of 10 employees in total) that provides CFO services for a variety of businesses. In the case of new owners, he’s found that while many know how to make or sell a product, they often lack financial or accounting proficiency.

“They rely on the tax preparer to do the taxes and then they move on to the next step,” Santucci says. “But they don’t have a knowledge of their cost structure, and they sometimes don’t have enough analysis about seasonality or sales or cost trends to actually have a sustainable business. They don’t look at the numbers.” Then when a problem arises, “a lot of them get taken by surprise, and the first thing they do is blame it on the accountant.”

Like a detective, the outsourced CFO looks for ways to help companies “make money in a different way than just sales,” Santucci says. Sleuthing duties include finding measures to trim costs or securing a better line of credit from banks.

Santucci’s firm, founded 15 years ago, provides fractional services for clients including Maine Plastic Surgery Center in Portland and the Migis Hotel Group.

“It’s good to be able to help a small business in Maine grow and succeed,” says Casey Skovran, a senior consultant at Opus. “Many of them just need someone to bounce ideas off or answer a text asking if they can afford to pay a small bonus this year — all sorts of little questions like that.”

Grateful for the help, Maine Plastic Surgery Center Director Christina Alves says it’s also been useful to get greater clarity from Skovran on the spa and medical sides of the business.

“We’re able to really drill down and see where the opportunities are,” she says.

As Opus looks to attract more clients, the agency has teamed up with the Swanson Group in Westbrook on a collaboration called Your Business Accountant to offer a package of services from accounting to fractional CFOs. Santucci says Opus may also add other fractional services to its own offering, for example in marketing where there’s growing demand.

Accounting firms

Among large Maine accounting firms, Portland-based Baker Newman Noyes formed a client accounting and advisory services practice in August.

The three-person team is led by Boston-based Managing Director Nick Sampson, who hopes to add a fourth by the end of this year. He says the firm is already seeing success at the controller level, helping bring clients’ financials into GAAP compliance and effectively manage their internal accounting resources.

As the team adds C-suite assignments, it will nevertheless steer clear of doing so for clients being audited by the firm for the sake of professional independence.

“We may be able to provide a lower-tiered service, depending on the scope of the work,” Sampson explains, adding that “as much as we can, we want to be a full-service professional advisory firm for our clients. We proactively bring new opportunities and ideas and look for ways to further support their organization while adhering to strict and reputable independent standards.”

BerryDunn strives to do the same in providing fractional financial analysis and advisory services to clients in a range of industries from real estate to health care.

“We don’t consider ourselves as an alternative to internal C-suite teams as we work to maintain our independence from management,” says Sarah Belliveau, CEO of the Portland-based firm.

Home-based entrepreneurs

From her home in the Aroostook County town of Washburn, Karin Petrin leads a financial management and advising firm she founded in 2006. Her varied career includes stints as a town manager, Tribal government CFO and management roles in several small businesses.

At Karifin Partners LLC, she offers all functions of small business back-office business management, lately expanding into more strategic financial support and business advising as a contracted CFO. Her clients — more than 15 at the moment — include businesses, organizations and government entities with up to $3.5 million in annual revenue, for whom a full-time CFO is typically out of reach.

“The fractional space gives them an opportunity to tap somebody with expertise who can help for a few hours per week or month, with a project, or on an interim basis,” she says. “If it›s done in small enough chunks, it’s affordable.”

She’s part of a team that also includes a part-time bookkeeper in Detroit, grant writer near Bangor and a local administrator. For some nonprofit clients, the team has had to help rebuild their books so that Petrin could create better compliance and financial management strategies.

“They’ve got solid budgets, but there’s no wiggle room,” she says. “We need to be able to forecast, so we have to fix the messes to create better strategies.”

Andrew Marianski of Capitis Advisors also works independently, from his home in Yarmouth, as a part-time strategy consultant and fractional CFO for clients including Hyke, an insurance technology startup formed from last year’s merger between MyHealthMath and a United Kingdom peer. He was originally hired by Bob Watterson, MyHealthMath’s founder and former CEO.

“In the beginning, I did that stuff myself because I’m financially conversant and then added in a very fractional bookkeeper just to take care of things like payroll,” says Watterson. “As we grew and wanted more sophistication and experience in that area, we hired a fractional CFO. Whether you’re a big or little company, it professionalizes the finance department with the fractional amount of money you have to spend.”

Besides Hyke, Marianski provides part-time CFO services to two other clients, and to some extent finds it easier not to be on staff when there’s bad news to share.

“You’re not worried about losing your job,” he says, “so you get a bit more independence … This is a gig and I’m here to help.”