What is fractional accounting? Key benefits and how to get started

Startups and small businesses face many challenges in their journey to growth. Like any company, they need expertise in accounting, bookkeeping, and tax. But when staff budgets are tight, hiring an in-house finance team isn’t a viable option. This is where fractional accounting can help. 

Fractional accounting enables businesses to access accounting expertise on a part-time basis. Businesses get all the benefits of an in-house accounting team but without the overheads and commitment. Unsurprisingly, fractional accounting is a fast-growing trend, opening new opportunities for accountants looking for career flexibility and autonomy. 

Read on to discover everything you need to know about fractional accounting. We’ll cover how it works, the key benefits it brings for accountants and businesses, and how to get started as a fractional accountant. 

What is fractional accounting?

Fractional accounting is an innovative approach to delivering and receiving accounting services. Instead of hiring a full-time, in-house accounting team, businesses can hire accounting professionals on a part-time, as-needed basis. This enables businesses to implement accurate, compliant accounting processes without the financial commitment of a full-time arrangement. 

The flexible, cost-effective nature of fractional accounting makes it a popular choice for startups or other small and medium-sized businesses (SMEs). Larger businesses can also tap into fractional accounting during busy periods, but in most cases, having a stable, in-house finance team that understands the business inside and out is more advantageous. 

From the accountant’s side, fractional accounting involves offering services to various different clients. This provides a more diverse range of professional opportunities, without being tied down to one particular business. Fractional accountants may work as part of a firm that provides fractional services. Alternatively, they may work on a freelance or contract basis. 

The benefits of offering fractional accounting services

Fractional accounting brings plenty of benefits for accounting professionals, opening the door to a more flexible and diversified way of working. In this section, we’ll explore the key advantages of going fractional.

Greater flexibility and autonomy

A full-time position brings the security of a reliable income, but it’s not for everyone. Fractional accounting provides accountants with a different path. Instead of being embedded within one organization, they can work with multiple clients simultaneously. This brings greater flexibility and autonomy to their work. 

A better work-life balance

Fractional accountants can pick and choose the clients they want to work with. This gives them greater control over their work schedule, allowing them to balance professional and personal commitments more effectively. Unlike many full-time employees, fractional accountants can choose where and when they work.

Diversified income streams

Full-time employment can suddenly end, leaving you without an income. Likewise, working with one or two large clients can leave you open to financial issues if one of them decides to end the relationship. Fractional accounting services are spread across multiple clients, providing more diversified income streams. When one project ends, you’ll have others to fall back on. 

Focus on specialized services

Full-time accountants are often required to take on a more generalist role to meet their employers’ needs. Fractional accounting, on the other hand, provides an opportunity to specialize in a particular area of accounting — audit, financial reporting, or bookkeeping, for example. You can also specialize in particular industries or business types. Becoming a specialist increases your professional value, allowing you to charge more for your services.

Work with an interesting range of clients

Fractional accounting opens the door to a broader client base. Instead of operating within one organization, you are invited into different businesses on a part-time basis. You get to see how different businesses are organized, providing you with fresh perspectives and new experiences. These businesses are often interesting startups, and you get to be part of their growth story. You also have the opportunity to grow your professional network and reputation on a larger scale.

Benefits for businesses

Fractional accounting brings plenty of benefits to businesses as well. It enables companies of any size to access professional accounting expertise without having to commit to hiring full-time staff. It also provides greater flexibility, enabling businesses to scale the services they require to their present needs. As a more cost-effective approach, it allows businesses to manage their finances more responsibly. 

Where fractional accounting is in demand

While any company can benefit from fractional accounting, it is more popular in certain types of business than others. In this section, we’ll look at some areas where fractional accounting is in high demand — and the opportunities they offer.

Startups and SMEs

As we’ve already covered, startups and SMEs are prime candidates for fractional accounting services because they: 

• Require financial and accounting expertise, like any business
• Operate on tight budgets and may not be able to afford an in-house professionals
• Need a cost-effective approach that enables them to scale accounting services up and down

By offering part-time or project-based accounting services, you can provide startups and SMEs with crucial accounting know-how without the burden of a full-time salary. The good news is that the SME market is huge. In the US alone, there are more than 33 million small businesses, which accounts for 99.9% of all businesses. 

Growing businesses managing complex transactions

As companies grow, they have to deal with increasingly complex accounting problems. These often require specialist support. As a fractional accountant, you can play a central role in helping businesses navigate major strategic changes such as: 

• Rapidly scaling operations 
• Standardizing financial processes
• Expanding to new markets
• Handling more complex payroll runs
• Upgrading to new financial systems

Fractional accountants can help oversee these pivotal moments, ensuring sound financial decision-making and regulatory compliance.

Businesses undergoing major corporate changes

Major corporate deals such as mergers and acquisitions often create a demand for temporary yet specialized accounting support. During these crucial periods, businesses need experienced professionals to oversee the financial complexities involved. Often, they don’t have those skills in-house. 

Fractional accountants who specialize in mergers and acquisitions can be brought in to help oversee key processes, such as:

• Conducting thorough audits
• Performing financial due diligence
• Helping to secure financing
• Integrating financial accounts post-merger

Businesses seeking seasonal or temporary support

Businesses often experience temporary spikes in demand for accounting services. These can be seasonal — for example, in the run-up to the corporate tax return deadline. They can also be sporadic — for example, when an in-house accountant is ill, on parental leave, or departs the company unexpectedly. 

Fractional accountants can help in these situations. By stepping in to meet the new demand for accounting expertise, they can ensure business continuity during critical periods. 

How to position yourself as a fractional accountant

Fractional accounting isn’t for everyone. But if you like the sound of flexible and varied working arrangements, it’s a viable option that can be both lucrative and professionally rewarding. 

In this section, we’ll highlight some steps to take to get set up as a fractional accountant. While some large accounting firms employ accountants as fractional service providers, we’ll assume here you’re interested in being your own boss.

Outline your services and target market

An important first step is to think carefully about the type of services you want to offer. Do you want to offer general accounting support, or will you focus on a particular niche and offer specialized accounting services? 

It’s also important to consider the type of business you want to work with. It can be tempting to target any and every type of business. But by focusing on a particular business size or sector, you can hone your services to specific needs. A fast-moving tech startup will have very different needs to an established enterprise, for example. It will also have very different internal processes. 

Define your pricing structure

Pricing is one of the most important factors to consider when setting yourself up as a fractional accountant. There are different pricing models you can go with, each with its own benefits. These include:

• Retainer model: clients pay a fixed monthly fee in exchange for a set number of hours or specific services
• Hourly rates: for short-term or occasional jobs, charging per hour is a sensible choice
• Project-based fees: for larger or one-off projects, you can agree on a flat fee that covers the entire project

Make sure you do some market research before deciding on payment models and amounts. The key is for pricing to be competitive while also reflecting your experience and expertise. Undercutting the market can gain you more clients, but you’ll be selling yourself short. On the other hand, pricing yourself too highly makes it difficult to land clients. 

Market yourself as a fractional services provider

Acquiring new clients as a fractional accountant requires a business mindset. You need to develop a strong personal brand backed by a professional, SEO-optimized website, complete with clear information about: 

• The benefits of using a fractional accountant
• Your skills and expertise
• The services you offer
• Your pricing structure

It’s a good idea to create content that educates potential clients on the benefits of using a fractional accountant. This can include blog posts, guides, or even video content.

Once you’ve secured some clients, be sure to get some testimonials from them. Social proof is a powerful marketing tool, and adding a client quote or two to your website can make all the difference.

Social media is another important frontier for marketing your services. Set up business accounts on sites such as LinkedIn, Facebook, and Instagram. Post regular updates, showcase your skills, and engage with your target audience as much as possible. 

Network with the business community

The target market for fractional accounting is huge. The challenge is connecting with potential clients. Networking is crucial here. By engaging with the business community, you can raise your profile and gain trust. This may lead directly to new clients or indirectly through word of mouth. 

There are several ways you can engage with the business community, including: 

• Posting regular updates on social media
• Attending industry events for your target market
• Join online forums and communities 
• Offer free workshops or webinars on relevant topics

The role of project management software in fractional accounting firms

Managing multiple clients can be a challenge from an organizational and operational perspective. At any given moment, you may have multiple different tasks on the go, each with its own dependencies and deadlines. If you aren’t organized, something could slip through the cracks. 

This is why it’s so important to choose the right technology. With the right practice management software, you can streamline your accounting workflows and organize your tasks, clients, and communications all in one place. 

In this section, we’ll look at some of the key features of practice management software for fractional accountants. 

Engage potential clients and formalize arrangements

Some practice management platforms enable you to send proposals and engagement letters. These are professional documents where you can:

• Engage potential clients
• Promote your services
• Explain your pricing
• Outline expectations 

With TaxDome, you can build highly professional and customizable proposals and engagement letters into your onboarding workflow. In addition to outlining who you are and what you offer, you can formalize relationships with legally binding e-signatures. You can also gather payment details, collect deposits, and automate payment through recurring invoices — all in one place. 

Automate tasks and workflows

Accounting is full of repetitive administrative tasks. If performed manually, these tasks can take a significant chunk of an accountant’s time, meaning they have less capacity to take on new clients. In recent years, however, accounting automation has emerged as a key technology. By automating repetitive tasks, accountants can work smarter and faster than ever before. They can scale their services without putting in ridiculous hours and damaging their work-life balance.

While virtually all practice management software enables you to automate standalone tasks, the best platforms enable you to automate entire accounting workflows. 

With TaxDome, for example, you can add new jobs to a pipeline that’s made up of different stages. Each stage has its own automations. Job moves from one stage to the next when a certain action is triggered — for example, an engagement letter is signed. In practice, this means you can communicate with clients, send and gather documents, assign tasks, and get paid — all without any manual input. 

Consolidate client data and communications 

A CRM is an essential tool for any accountant, enabling them to manage client relationships more effectively. It’s particularly important for those offering fractional services — the more clients you have, the more you need a system for organizing them. 

The best practice management software comes with CRM capabilities built-in. TaxDome, for example, offers a robust CRM designed specifically for accountants and tax professionals. In addition to managing your clients, contacts, and prospects, you can: 

• Segment clients based on customizable tags
• Send bulk communications and automated reminders
• Sort clients using customizable filters 
• Set client preferences
• Collect payments

Gain visibility into tasks, progress, and deadlines

As a fractional accountant, you’ll be working on multiple projects and tasks simultaneously. You’ll need a system for staying organized, to ensure you never miss a deadline. This is where task and project management software can help.

Most practice management platforms come with task management capabilities. That said, offerings can vary from simple deadline trackers and to-do lists to advanced project-related analytics and workload management tools. 

TaxDome provides you with a 360-degree view of your tasks, projects, and deadlines. You can view tasks in calendar, list, or Kanban view. And with our firm insights dashboard, you can get a real-time snapshot of your work and progress at any given moment. 

If you work within a team of accountants, TaxDome provides an array of collaboration tools. These include internal chats and mentions, analytics for team performance, and insights into workloads. 

Track time and set up automated billing 

As a fractional accountant, you might find yourself charging per hour on smaller projects. Practice management platforms with time-tracking capabilities can help you gain an accurate picture of the amount of time you’ve spent on particular tasks — and bill your clients accordingly.  

TaxDome offers integrated time and billing tools, enabling you to:

• Track billable hours with the click of a button
• Create accurate invoices based on fractional accounting hourly rates for different tasks or clients
• Accept payments via card or electronic bank transfer 
• Track work in progress to see unbilled work for different clients

Client management on the go

In today’s mobile-first world, the ability to manage clients and view tasks on any device is crucial. Top practice management platforms come with mobile apps that allow you to run your fractional accounting business on the go. 

For such an important feature, however, it’s surprising that some platforms don’t offer mobile apps. Others may offer apps only on Android or iOS, but not both operating systems. So be sure to do your research before making a decision. 

TaxDome comes with a highly intuitive mobile app available on all Apple and Android devices, where you can: 

• Access your firm’s CRM anywhere
• View and upload documents
• Communicate with clients via secure chats 
• Receive push notifications for different actions

What’s more, TaxDome offers a mobile app for clients. This is essentially a mobile version of the TaxDome client portal, where clients can upload documents, complete tasks, interact with you, and pay bills anytime. 

To sum up

Fractional accounting represents a chance to work with greater flexibility, variety, and autonomy. Instead of being tied down to one client or employer, accountants can broaden their client base and work with multiple clients simultaneously. 

On the client side, fractional accounting enables businesses to tap into accounting expertise as and when they need it. Instead of committing to hiring a full-time accountant or finance team, businesses can engage fractional accountants on a part-time or per-project basis. 

Setting yourself up as a fractional accountant involves promoting your personal brand, building an online presence, and outlining your services and pricing. But perhaps the most important factor in how you deliver those services is the technology you choose. 

With TaxDome, you get access to a comprehensive suite of tools designed to make your work more productive, profitable, and organized — and your clients happier. To see for yourself how TaxDome is the perfect tool for your fractional accounting needs, request a demo today.