Fractional accounting means a business gets accounting support on a part-time or shared basis instead of hiring a full-time accounting department. A fractional bookkeeper, accountant, controller or CFO works across several companies and gives each one the hours it needs.
Wishup is a virtual assistant company in the United States. This guide explains what fractional accounting covers, what each role does, what fractional accounting services cost, and when a small business should use them.
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 a service model where a business pays for accounting work by the hour, by the project or on a monthly plan, instead of hiring full-time finance staff. In simple terms, the meaning of fractional accounting is buying a fraction of an accountant's time. The work ranges from bookkeeping and reconciliation to financial reporting, controller oversight and CFO-level planning.
Fractional accounting is provided by an expert, like a fractional CFO, tax CPA, or Controller, who will provide financial insight, guidance, and support, interpret the results, and communicate with management and non-accountants.
Fractional Accounting Services
Fractional accounting services cover the financial work a growing company needs without a full in-house finance department:
- Bookkeeping: Recording sales, expenses and invoices.
- Reconciliation: Matching bank and credit card accounts to the books.
- Accounts payable and accounts receivable: Paying bills and collecting on invoices.
- Month-end close: Producing the profit and loss, balance sheet and cash flow statement.
- Payroll support and tax preparation: Working alongside the company's CPA.
- Controller oversight and CFO-level forecasting: From firms that offer those roles.
Most firms match the role to the task: a bookkeeper for daily entries, a controller for process and oversight, and a CFO for forecasting and strategy.
What is a fractional accountant in a company?
A fractional accountant in a company is an outside accountant who handles the company's accounting part time, alongside other clients, instead of working as a full-time employee. They analyze financial data, track revenue and expenses, prepare reports for management and guide 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 and Bookkeeping?
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.
Outsourced bookkeeping covers day-to-day transaction recording, bank reconciliation, and financial reporting, the foundational layer of any fractional accounting engagement.
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 lower 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.
What is a fractional bookkeeper?
A fractional bookkeeper is a part-time, outside bookkeeper who records a company's daily financial transactions and keeps its books accurate, without being a full-time employee.
Typical fractional bookkeeper work includes:
- Transaction recording: Sales, expense and invoice entries, categorized to the company's chart of accounts.
- Bank feed and reconciliation: Matching bank feed and credit card transactions to the books every month.
- Accounts payable and accounts receivable: Paying bills on schedule and following up on unpaid invoices.
- Month-end close: Reconciling all accounts and producing the profit and loss, balance sheet and cash flow statement by the first week of the next month.
- Catch-up bookkeeping: Bringing months of backlogged books up to date.
- CPA handoff: Preparing clean books for the CPA at tax time.
Fractional Bookkeeping Services
Fractional bookkeeping services give a company this bookkeeping layer on a monthly plan. For businesses asking what is fractional accounting in practice, Wishup's virtual bookkeeper covers the bookkeeping layer and supports the company's CPA or CFO.
Each bookkeeper is trained on QuickBooks and Xero. Onboarding takes 60 minutes. Managed bookkeeping starts at $299 a month, and a dedicated bookkeeper starts at $999 a month part time. See bookkeeping plans.
What Does Fractional Bookkeeping Cost?
Independent fractional bookkeepers charge $50–$100/hour. Firms typically price bookkeeping at $500–$2500/month, based on transaction volume and how many accounts need reconciling.
A part-time in-house bookkeeper costs $35000–$45000/year once payroll taxes and benefits are added, and that's before software costs.
Fractional Controller
A fractional controller is the senior-level executive responsible for process and cash flow management, internal controls, accounting principle compliance, and managing finance and accounting teams.
The fractional controller owns financial reporting, producing monthly income statements, balance sheets, and cash flow statements that management and investors rely on for decisions.
Fractional CFO
A fractional CFO handles 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 tax CPA handles tax preparation and filing, financial reporting for tax purposes, identifying applicable tax credits and deductions, and representing your business with tax authorities during audits or reviews.
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 fractional accounting services, 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 accounting services to 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?
Use fractional accounting when your business reaches 10+ employees or $500K+ in revenue but does not yet need a full-time CFO or controller
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.
Hire fractional accounting support when scaling from $1M to $20M in revenue, the growth phase where financial complexity outpaces in-house capacity.
Fractional accounting is a cost-effective solution for a variety of businesses, but it’s particularly beneficial for:
- Startups and Small Businesses
- Growing Businesses
- Seasonal Businesses
- Companies in Transition
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?
Fractional accountants typically charge $50–$150/hour depending on role,
- a fractional CFO runs $150–$300/hour,
- a controller $75–$150/hour, and
- a bookkeeper $50–$100/hour.
At market rates, a part-time fractional team costs $2,000 to $8,000/month.
Fractional Accounting Cost Comparison
A Wishup virtual bookkeeper starts at $999/month flat, no hourly billing, no hidden fees, and no long-term commitment required. Check the pricing!
Why Use Fractional Accounting Services?
Add fractional accounting expertise when payroll, financial reporting, and tax planning exceed your in-house bandwidth
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.
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
Confirm they work in QuickBooks and Xero: The 2 most widely used small business accounting platforms. Wishup bookkeepers are pre-trained and certified on both, along with 70+ additional bookkeeping and fintech tools.
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.
Get fractional bookkeeping support
Fractional accounting gives a growing company the finance support it needs without a full-time accounting department. The starting point is clean books: accurate reconciliation, a monthly close and reports a CPA or CFO can rely on.
Wishup's bookkeeping plans start at $299 a month for managed bookkeeping and $999 a month part time for a dedicated virtual bookkeeper. Onboarding takes 60 minutes.
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FAQs about fractional accounting
What is fractional accounting?
Fractional accounting is a service model where a business pays for part-time or shared accounting support instead of hiring a full-time accounting department.
What is a fractional accountant in a company?
A fractional accountant is an outside accountant who handles a company's accounting part time, alongside other clients, instead of working as a full-time employee.
What is a fractional bookkeeper?
A fractional bookkeeper is a part-time, outside bookkeeper who records daily transactions, reconciles accounts and closes the books each month.
How much do fractional accounting services cost?
Fractional bookkeepers charge $50 to $100 per hour, controllers $75 to $150 and CFOs $150 to $300. A part-time fractional team typically costs $2000 to $8000 a month.
