What is Fractional Accounting? A Guide for Small Businesses

As a startup or a small to midsize business, you are most likely either underpaying, trying to save money, or overpaying for accounting because the scope of your accounting needs is not truly known by management. 

Unfortunately, this can cause several different problems in the overall health of the company. 

The simple solution is a Fractional Accounting Service.

What is Fractional Accounting?

Fractional Accounting is the service where a team or individual professionals perform the accounting functions for your small, mid-sized, or large business on an hourly or project basis instead of full-time.

Fractional accounting is held by an expert, like a fractional CFO, tax CPA, or Controller, who will provide financial insight, guidance, and support, interpret the results, and communicate to the management and non-accountants.

What Does a Fractional Accountant do?

A fractional accountant analyzes your financial data to optimize your revenue opportunities, strategically reduce expenses, and provide guidance for wise business decisions.

A fractional accounting team reduces internal risks through external oversight, which helps prevent theft and minimize the effects of employee turnover. 

What is Outsourced Fractional Accounting?

Outsourced fractional accounting is a model where a financial team or an individual works remotely outside your business setup and comes in to help from a contractual service-based perspective.

These fractional accountants are not full-time members.

Your business needs an accountant, a controller, a CFO, and probably a tax CPA. For all parts of this team, finding one person who can effectively do all these things in a smaller business is challenging due to cost.

Instead of employing four or five people, you employ one firm that uses its resources to provide these services at a much cheaper price.

Part-Time vs. Fractional Accountant

A part-time accountant is committed to your business or a single company. They work on a schedule given by the employer and are salaried on hourly wage. Typically, part-time accountants have opportunities for raises or to move to full-time positions.

However, a fractional accountant works for numerous companies by splitting their time. It is similar to freelancing or contract work, as they are hired to perform a specialized task.

Understanding the Roles of Fractional Accounting Team

Beyond just a controller, if you discover that you require an outsourced CFO for more strategic financial guidance.

A fractional accounting team takes on various roles and responsibilities for your business's needs. This flexibility allows you to access a wide range of expertise without the commitment of a full-time hire.

Fractional Bookkeeper

A Fractional bookkeeper has accounting knowledge to record day-to-day sales and expense transactions, bank reconciliations, account reconciliation, and financial reporting.

Fractional Controller

Fractional controller is the senior-level executive responsible for process and cash flow management, internal controls, accounting principle compliance, and managing finance and account teams.

Fractional CFO

A fractional CFO handles the financial planning, forecasting, budgeting, and management to overcome financial challenges.  

Not all businesses can hire a full-time CFO, so outsourcing CFO services is a smart and cost-effective solution. The importance of outsourcing your bookkeeping and accounting service is not limited to it; there's much more.

Plus, you get to onboard an expert who helps improve the financial situation and provides strategic advice.

Fractional Tax CPAs

A fractional tac CPA is ideal for tax filings, financial reporting, tax credits and deductions, and representation with tax authorities.

Read More: The Strategic Value of Hiring a CPA

Pros and Cons of Outsourcing Financial Accounting Services

First, the advantages of outsourcing financial accounting.

Affordable Talent 

Small and midsize businesses get access to global talent when they outsource accounting services. The expertise gap that your in-house team is lacking gets filled. Since these people work for you on a contractual basis, you can pause and renew the contract anytime, which isn't the case with an in-house team.

Cost-Effectiveness and Flexibility

Cost is significantly less when outsourcing fractional accounting services. Often, small and medium-sized businesses cannot justify the expense incurred by paying a full-time bookkeeper, controller, CFO, or CPA.

By outsourcing the fractional accounting service, your business gets access to financial expertise, reducing the burden of overhead costs like salary and other benefits. 

Access to Expertise and Technology

You get experts in all fields(bookkeeper, controller, CFO, tax CPA) within the service. They have different people focusing purely on various areas of financial accounting to give you that expertise.

Cross-Industry Expertise

When an outsourced accounting service has many clients, they gather information daily from clients and use that to help other clients.

They see what's happening in other industries, how clients structure things, and their performance. They use those insights to help different clients strategically.

Improved Record Keeping

You may not always have access to the latest technology and software tools like Quickbooks and Xero to record your accounting data.

So, when you decide to outsource the accounting services from a third party, they come in as an expert taking care of your books of accounts and providing accurate and improved record keeping.

Peace of Mind

When you know that a professional dealing with multiple clients similar to your business niche over the years is handling your finances. You're at peace because now your finances will be handled by an expert who has delivered results previously.

Allows Focus on Core Operations

Focus on what your company does well. Focus on aspects that differentiate you from your competitors.

By concentrating on your core competencies, you'll have more bandwidth to implement strategic decisions, achieve company-wide goals, and get more work done faster. This way, you won't waste time and energy on non-essential, time-consuming tasks.

Improved Efficiency

The virtual bookkeepers, accountants, or CFOs, when outsourced for your accounting functions, bring in a wealth of experience, and the task that an in-house employee would have done in 8hrs, they get it done in 4hrs, all because of the balance they have between experience and expertise thus bringing your business double the success. 

With all the above benefits, here are the potential risks to consider before outsourcing fractional accounting.

Less Control

It means you're paying for the output and not the end, but you're paying for deliverables to be met and deadlines to be met, but not necessarily in control over the who, what,  when, where, and how of the work getting done. 

Sometimes, that lack of control and visibility into the work is a deal-breaker for some companies. And it's something you need to consider before you make that change.

Less proximity

When you outsource a fractional role, you're not hiring someone for a 40-hour week. For example, you might hire an outsourced CFO for just a few days each week, depending on what your business requires at that moment.

It's important to note that this CFO may have other clients, which means they won't be able to focus solely on your business all the time. 

You can't always walk into their office for a quick chat like you could with a full-time employee. Instead, you may need to email or schedule some time to talk with them. 

It can be a little bit more difficult when something's very urgent, but with a little bit of structure, it can run very smoothly with the level of communication. 

What Type of Business Would Benefit from Having a Fractional Accounting Department?

A fractional accounting department can make a big difference for small companies moving beyond the startup phase, having around 10 or more employees or making about $1 million in revenue. 

It gives businesses access to professional accounting help without hiring full-time staff.

For example, a full-time Chief Financial Officer (CFO) costs around $150,000 annually. With a fractional accounting team, you only pay for the services you need when you need them. 

This saves your small business up to 70% in salary costs.

You'll need strong financial support as your business moves from 10 employees or $1 million in revenue to 100 employees or $20 million.

Fractional accounting is a cost-effective solution for a variety of businesses, but it’s particularly beneficial for:

1. Startups and Small Businesses
2. Growing Businesses
3. Seasonal Businesses
4. Companies in Transition

Wishup helps you transition smoothly by providing scalable financial management solutions that grow with your company.

How can Fractional Accounting Help Startups Save Money and Increase Efficiency?

As a startup business, you’re already wearing many hats. In such a scenario, if someone steps in and you don’t have to train them, it can be a huge relief.

With fractional accounting, an experienced accountant comes on board already knowing what to do, so you don’t have to spend time or resources on training. They can immediately take over tasks like managing your books, handling taxes, and ensuring you're financially organized.

This saves you money because you’re not paying for a full-time employee with benefits. Instead, you get an expert on a part-time basis, exactly when you need them. Plus, by letting professionals handle your finances, you avoid costly mistakes and gain insights that help your business run more smoothly and efficiently.

How Much Does A Fractional Accounting Team Cost?

The minimum pricing for outsourcing a fractional accounting team is $999 per month only, but this cost may vary from company to company and depending on your business needs.

Why Use Fractional Accounting Services?

As your business grows, you’ll need more financial help—things like managing payroll, financial reporting, and tax planning. 

Instead of hiring multiple people, you get the right experts for each task with a fractional accounting team, and they grow with you as your business scales up.

A fractional accounting team gives you access to highly skilled accountants who can handle complicated tasks like taxes, compliance, and financial strategy, utilizing financial close software to ensure accuracy and efficiency.

You get high-level expertise without paying a full-time salary.

Accounting tasks take a lot of time. When you hand these tasks over to a fractional accounting team, you free up time to focus on growing your business.

By not hiring full-time staff for every accounting role, you save tens of thousands of dollars per year. Fractional accounting service professionals help you keep a close eye on your cash flow so you can invest money in the right areas of your business.

How to Choose a Fractional Accounting Team

When choosing a fractional accounting team, be on the lookout for the following:

Expertise

When outsourcing fractional accounting services, take time to look at their previous track of results. Their track record will provide insight into the type of industry they have worked with and the results of their previous clients.

Look for a company with a proven track record of driving results, preferably within your industry. Make sure to ask for examples of past work. If you don't see any information about the results, you can always contact the company of interest and ask for some samples of their work.

Look at Their Resources

When you outsource fractional accounting to a company, you want to see their resources. Ask whether they provide a dedicated account manager or a team who can take care of it in the absence of the bookkeeper, accountant, CFO, or CFA. 

At Wishup, for example, we have a team to help you handle your financial accounting, which means you get everything you need in one place.

Services Offered

When selecting the right fractional accounting company, examine their services. This step ensures they provide everything you need for your business accounting. Be on the lookout for key services that you need at that point for your business. Aside from services, check how much their package costs. Does it fit within your budget?

Technology and Tools

Check if they use advanced accounting tools and software like Quickbooks and Xero and take a data-driven approach to providing financial reports.

Look at Their Experience

When you're trying to choose a company to outsource fractional accounting, you want to partner with an experienced one. You don't want to entrust your finances to just any agency. You must choose a company that has years of experience with accounting and bookkeeping.

Wishup Client Case Study

Wishup Cleared Over $200,000 in Backlogs for TAABS

• Problem: TAABS had financial backlogs and high staff turnover.
• Solution: Wishup aligned top talent trained in specific Bookkeeping tools that TAABS needed.
• Achievement: Cleared $200,000 in financial backlogs $64,000 in sales mismatches, merged 100 duplicate vendor entries, and managed $75000 in HOA payments for 130 clients in one day.

How Wishup Simplified Money Management for Licentiam

• Problem: Licentiam struggled with lost revenue due to disorganized finances.
• Solution: Wishup implemented a streamlined bookkeeping system.
• Achievement: Improved financial accuracy and saved time and costs.

Here's What Licentiam's Co-founder Experienced with Wishup

Outsource Your Accounting Service Today

When you’re busy running your business, you want to have a trusted partner that will manage your business finances. If you’re looking for the right company, look no further than Wishup.

The reasons:

Ready to blow up your revenues in 2025? Schedule a free consultation to speak with experts about our accounting services!