Enlisting the help of a temporary or outsourced financial executive has become a popular way for small businesses to reduce costs and still have a resource with the experience they need. We are often asked if a temporary CFO is appropriate and how to find the right one. Here are the most often-asked questions when it comes to deciding if an outsourced financial resource is right for your business.
Why should I use an outsourced CFO?
Hiring an outsourced or temporary financial executive can immediately improve the profitability and efficiency of your company if it is hampered by limited financial expertise, weak accounting practices or unclear direction and planning. Every day, companies operating without the guidance of an experienced CFO lose the opportunity to maximize their profit and potential. Using an outsourced financial executive, even on a temporary or project basis, can help your company create strong accounting practices, plan for the future, and bring a level of experience to your staff and mentoring for your employees that your company might not be able to afford on a permanent basis.
When is an interim CFO appropriate?
An interim or part-time CFO provides significant advantages when working in rapidly changing environments. Preparing for an acquisition or a major operational shift is an ideal time to bring in a seasoned financial professional to ensure all aspects of the transition are prepared for adequately. Another time to consider interim help is if your CFO leaves your company. An interim CFO can bridge the coverage gap until an executive search can be completed, or be introduced in a short time frame to stabilize a situation and help lead the company through a transition. Your company may also not yet be big enough or complex enough to require a full-time executive for your business and thus a part-time CFO can be utilized when and where you need the expertise.
Why do I need a CFO resource at all? My current system and staff seem to be doing fine.
For day-to-day operations, your existing accounting staff may be sufficient. But in some cases, your staff simply doesn't have the experience, breadth or the skills your company needs, or the project is simply too big for your permanent staff to handle. It's at times like those when hiring a CFO with decades of experience on a part-time or interim basis makes the most sense.
How does an outsourced financial executive work with my existing staff?
How an outsourced CFO blends with your existing staff depends largely on the project s/he was hired for. Many times they are treated as consultants, working with your staff on a specific project until its completion. The ones who are hired as part-time CFOs and provide services on an ongoing basis are often seen as a member of the regular staff. How you position the interim CFO is dependent upon the role you expect the executive to fulfill.
What should I look for in an outsourced financial executive?
What you should look for depends on what you're hiring the executive to do. If you're hiring a financial executive for a specific type of project, such as an acquisition, find an executive with experience in that type of transaction. If you want assistance with setting goals and establishing solid accounting practices, look for someone with experience in your particular industry with experience in designing and reviewing business plans who can help you plan for the future. Regardless of the project, a financial executive should have strong negotiating skills and work well with your existing staff.
How do I hire an outsourced or interim CFO?
The steps for hiring an outsourced CFO are similar to hiring any permanent employee. First of all, find out what a CFO really does, especially if your company has never used one. Ask other executives and research the person's background to ensure that a person with those skills is what your company actually needs. Decide exactly what duties you want the person to perform, and how much you are willing to pay for these services. Once you've narrowed down the applicants, test the candidates with real-life financial problems to evaluate and see how they would resolve them. If the outsourced CFO will be working as part of a team on a project, have those potential teammates meet with the candidate to evaluate how well they'd work together. Never be afraid to ask for references or to speak directly with past clients. When deciding between two equally-qualified candidates, always listen to your instincts as to which one is the better choice for your company.
When should I hire a permanent CFO instead of an interim professional?
As a rule of thumb, you know you need a permanent CFO if you:
anticipate more than 50% revenue growth annually;
are planning an important financial transaction like an acquisition, change of banks or funding round;
have trouble managing the company's cash flow;
have multiple product lines and profit margin analysis is complicated;
are entering a regulatory environment that requires an expert in tax and/or compliance.
If your company does not yet meet these criteria, or if it only meets one or two, then a part-time CFO may meet your needs, and can help prepare and build your company to the point where a full-time CFO resource is needed.
As with all hiring, the main things to remember when hiring an outsourced or interim CFO is to evaluate your business' needs, and carefully evaluate an applicant's skills to determine if the person can meet those needs. When you do this, an outsourced or interim CFO can be a smart addition to your company's resources.
