The What, Why, and Where of Fractional Accounting
We didn’t invent it, but there was a time when it felt like it. Our original service line in 2002 was what we now call Business & Accounting Advisory Services, and at the time, remote work wasn’t really a thing. Fractional advisory services of any kind had to be done primarily onsite, limiting the geographical range of most service providers. We were almost unique in our neck of north state California.
Today, we are often asked what fractional accounting entails, when it makes sense, and how it is done. In short, here’s what we see as the what, why, and where of outsourced (fractional) accounting services.
What is it?
In brief, fractional accounting services are part-time, limited term, or project-based assistance with a variety of accounting functions.
To start with, consider what you mean by “accounting”. As with the word “doctor”, “accountant” covers a lot of territory. You wouldn’t visit an oncologist for your hay fever or a podiatrist for a heart problem – if you did, the good ones would give you an appropriate referral. Likewise, people use the word accounting to describe everything from bookkeeping to executive CFO level functions. As in medicine, there are many focuses and specialties.
When considering fractional accounting services, the first step is to determine what you really need. Is it help with payroll and accounts receivable? Preparation of financial statements and communication with your banks? Creating or overseeing an overall business plan, or assessing possible business acquisitions?
Consider also that the further you go up the ladder, the more that familiarity with similar operations is important. If you are a food distributor, it’s probably OK if your outsource payroll person has primarily worked in manufacturing. But if you want help with a business plan or an acquisition, your provider should have experience in similar industries.
Why might you need fractional services?
To continue the medical metaphor, there are more potential needs for various accounting services than I can list here. But the way we view it, we essentially offer clients two things: Expertise and time.
Pretty much every organization has its limits on both. Your team may have the time to jump into an unfamiliar project but not the experience or background. Or you may have the expertise internally, but the people who have it are up to their ears in other duties.
Accordingly, your needs may be ongoing but part-time, such as help closing the books, preparing monthly and annual financial statements, oversight of overall accounting functions, CFO level business strategy, etc. Or you may have a project with a specific outcome and end point, such as a business plan, feasibility assessment of a major project, or establishing accounting policies and procedures.
Fractional services can also help fill critical vacancies until a position can be filled, offering both expertise and time. We have often filled in for vacant controller or CFO positions, a time that can also be used to redefine or even create a position before making a permanent hire.
Like a faucet, fractional accounting services can be turned on and off according to your needs, something harder to do with employees. Costs and issues like benefits, vacation time, sick leave, staff turnover, and so on are the responsibilities of the provider, not you. This is also a consideration when deciding between a sole practitioner and a firm that specializes in these services. In the case of Morrison, we can call on our team to cover any absences, staff turnover, and needs for various types of expertise.
Where are services performed?
Fractional services were almost entirely onsite when we began offering them in 2002. That changed over the years as cloud-based accounting systems, remote desktop access, Zoom, and other resources became more available. And, of course, the pandemic pushed the needle as offsite work became almost mandatory in many cases.
There are advantages to both. Getting to know a business and its team in person can be more personal and offer insight into an organization and its culture. Some organizations are also limited as to their remote access, availability of its accounting systems, and other critical information.
Remote service lifts the limits on the geographic range. Some level of travel is generally needed for onsite services, and clients are typically charged for both the travel time and related costs – which do not add any particular benefits beyond an onsite presence. Some needs do not require 8 hours a day, but for a few hours (or even minutes) here and there. Remote services are more efficient for short and spontaneous needs.
We find that a combination of onsite and remote services is often best. We like to spend time onsite at the beginning of an engagement, when practical for the client, to get to know the organization and the people. On an ongoing basis, the benefits of remote services often outweigh the disadvantages, and Morrison now serves many clients throughout California as well as in other states.
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Another consideration, of course, is cost, mainly as compared to the cost of an employee or the cost of just leaving things undone. As needs vary from case-to-case it would be difficult (and likely inaccurate) to give estimates without knowing the specific needs. At Morrison, estimates are given upfront, with regular communication as to potential variances.
Please let us know if we can answer any questions. Fractional accounting services can provide great benefits, and we can help talk you through the what, why, and where of it.