Interim CFOs provide a fresh perspective on an organization’s finances in the short-term, but the changes they implement provide long-term benefits for the business. As a company navigates change, it’s important to understand the benefits of an interim leader and how they can be leveraged for growth. A temporary CFO can do more than hold down the fort during a transition—they can also help you transform your company through financial crises, rapid growth and major projects.
What Is an Interim CFO?
An interim CFO is a temporary finance executive hired by a company to provide financial leadership and support on a short-term, contract basis, ranging from a few months to a year. Interim CFO services are typically needed to fill a temporary gap in leadership, such as when a company’s CFO leaves, or during a period of transition, such as a merger or acquisition.
Is an Interim CFO the Same as a Fractional CFO?
An interim CFO and a fractional CFO are similar in their flexibility, though a fractional CFO is more like a part-time employee who stays at a company for an extended period. Meanwhile, an interim CFO is a full-time employee who often stays for less than a year. Interim CFOs have typically held CFO positions in other companies or have worked as financial consultants. They are able to quickly assess a company’s operations and provide strategic guidance to improve financial performance.
A fractional CFO may also augment a current full-time CFO if the executive needs more bandwidth or requires more specialized skills. Similarly, a temporary CFO can provide relief for a business with an inexperienced or lackluster finance leader to guide a project or handle a financial blunder.
The Advantages of Hiring an Interim CFO
Outsourcing a CFO for short-term strategic advisory allows you to tap into talent that is ready to hit the ground running. These services offer several competitive advantages, including:
- Testing: If a company is growing but has never had a full-time CFO, hiring an interim expert is a good way to test whether the company is at a stage where they need full-time leadership.
- Bandwidth: An interim CFO can take over the day-to-day financial operations for a business, freeing up time for the CEO and other executives to focus on driving revenue and other non-financial responsibilities.
- Expertise: These professionals typically have a wealth of experience and expertise in financial management, accounting and strategic planning within a specific industry and across multiple clients.
- Objectivity: Interim CFOs can offer an objective perspective on a business’s financial operations and performance. They can provide unbiased recommendations and insights that a CFO who has been in one role for many years may miss or ignore.
- Speed: Temporary leadership can be hired quickly to provide immediate financial support. This can be especially beneficial in crisis situations or during times of transition.
When Should You Hire an Interim CFO?
Many business owners and executives will have a succession plan in place for an eventual transition, but that doesn’t mean that unexpected turnover can’t happen. Temporary CFOs provide businesses with the financial leadership and expertise they need to succeed in the event of a departing CFO and in a range of other situations.
- Full-Time CFO departure: If the full-time CFO of a company suddenly departs, the company may hire an interim CFO to fill the gap and ensure continuity in financial operations.
- Financial crisis: If a company is experiencing financial difficulties, such as declining revenue or mounting debt, they may hire an interim CFO to develop a turnaround strategy and preserve the company’s valuation.
- Growth phase: If a company is experiencing rapid growth or expansion, they may need an interim CFO to help support scalability as they search for full-time talent. For startups, hiring an interim CFO is a good option during periods of rapid growth or change. Interim CFOs can help founders optimize burn rates and build processes that support sustainable growth.
- Special projects: When a company is undertaking a special project, such as a merger, acquisition, fundraising round or IPO, interim CFO consulting can provide specialized advisory and due diligence.
Of course, not every issue requires a CFO. Sometimes, you may simply need a lawyer to look over a contract, or you might need FP&A support to gain insights without paying for the CFO title.
How to Hire the Right Interim CFO
Interim CFOs are often hired on a contract basis, so it’s important to clearly define the role responsibilities, scope and engagement duration you need. When looking for a temporary CFO hire, look for an experienced and qualified CFO that has been through the same or similar project or situation that your business is facing.
You should look for a leader that has the right:
- Industry experience to handle the situation you’re facing.
- Technical acumen to analyze data and conduct forecasts.
- Experience in cloud-based systems to make insights available to all relevant parties.
- Communication skills to work with stakeholders.
- Culture fit with your team, just like any full-time hire.
Once the interim CFO is hired, you’ll need a clear onboarding process, including guidelines for access to the company’s financial data. Your CFO will need some time to assess the company’s financial health and identify areas for improvement. The business owner or CEO should communicate their goals, expectations and concerns with the CFO in the early stages of the hiring process. They should also communicate expectations and boundaries of the role with their internal team and department managers.
During the first days of the engagement, the interim CFO will likely spend time getting familiar with the company’s financial and overall operations, technical systems and processes. They may conduct a financial assessment, review financial statements and internal processes, and meet with key stakeholders to gain a deeper understanding of the company’s financial situation. They’ll then begin to develop a strategy and plan of action.
The Price of Interim CFO Consulting
Don’t let the price tag deter you if a well-qualified CFO is what your company really needs. The service you might get with a low-cost option could wind up costing you more in lost profits, increased risk or other hidden expenses. Sometimes, businesses think they’re saving money, but instead they spend more than they would have if they’d hired somebody with the appropriate experience in their area of business. Temporary, part-time or fractional CFOs are all cost-effective options that allow you to reduce risk, eliminate full-time employee costs, maintain equity in your company and ramp up quickly.
The Long-Term Value of an Interim CFO
The benefits of short-term advisory don’t stop when your CFO leaves. They set a business up for future success by:
- Calling out inefficient processes that have been overlooked or continued due to lack of expertise.
- Identifying cost-saving opportunities.
- Improving a company’s forecasting abilities or data visualization tools to enhance the speed and depth of future decision making.
- Preparing a company with a model for a full-time CFO hire.
Many interim CFOs end up serving a longer term with the company than originally intended. In smaller companies, the interim CFO will sometimes assume a fractional CFO role if all goes well with the initial contract, or if the company hasn’t grown to the size where it needs a full-time executive. Alternatively, the CFO may convert to a full-time CFO. According to a study conducted by professors at the University of Tennessee and Vanderbilt University, one in five interim CFOs were eventually promoted to full-time CFO status.
Right-Size Financial Leadership to Your Business
Need to fill a gap in leadership or receive guidance on a specific project? At Paro, we provide businesses with finance solutions from industry experts to help you transform your business roadblocks into growth opportunities. Find a strategic finance leader and get the interim CFO services you need for as long or as little as you need.
