The CFO'S Perspective

“My finance leader is leaving! Now what do I do?!”

In some sense, it’s tempting to offer the platitude, “a debit is a debit everywhere we go!” (which is a colloquial way to suggest that all accounting is created equal). However, while there’s some truth to that fact that every organization replacing a leader will need to take some core actions, you don’t need to drill down very far to realize that each business has unique elements to consider as well. Those unique facets will add complexity to how you respond to the reality of a financial leader leaving your organization.

The following guide will help your organization evaluate how ready it is for turnover in a finance leadership role, offer suggestions for how you can be better prepared in case your executive finance leader leaves, and provide key insights into what to do next if the loss of your financial leader happens suddenly.

A business valuation is a critical component of securing a company’s future. Whether it’s done as part of a business sale, merger agreement, litigation proceedings, investment negotiation, succession planning, estate planning, or in compliance with financial regulations, a company valuation gives all included parties reliable information about a business’s financial worth and risk level to aid in strategic decision-making.

While the specifics of the business will clearly determine its calculated value at the conclusion of the process, one person is instrumental in helping the company to arrive at that final number. An experienced CFO plays a key role in any business valuation by leveraging their financial expertise to offer strategic insights along the way and ensure an accurate final assessment of the company’s value.

Aesop’s fable about the race between the tortoise and the hare provides a story to show how a race is not always for the swiftest. In the business world, some companies are very focused on short-term financial results while others are managing for the very long-term time horizon. Some companies are working to improve their operations and financial results in order to sell the business in a few years, while others are building a business for the next generation of owners.

When there is a need to hire a new CFO, the question the CEO and the owners should consider asking is: do I need a tortoise or a hare as my next CFO?

As outsourced CFOs we are brought in to assist in a variety of situations across many different types of organizations. Every instance is unique in terms of what kind of financial position they are in, where they are excelling and/or struggling operationally, and what they are looking to get help with across their financial functions. As a result, their expectations can get hazy for the consulting CFO coming into the role. When this unclear view of what a fractional CFO should be doing is combined with financial management activities that are (either unintentionally or purposefully) against best practices or downright unethical, an outsourced CFO can find themselves in a sticky situation.

So, whether you are a consulting CFO looking for advice or a business leader looking for an idea of what to expect from the engagement, we have put together a quick resource to offer some guidance on how external CFOs handle ethical questions and issues.

If you’re looking to hire a CFO, have you stopped to consider whether you actually need one? Too often companies, especially successful small to mid-sized companies, rightly understand that they need strong financial leadership to maintain their growth and incorrectly conclude that they need to hire a full-time CFO to get it.

Now, as a company comprised entirely of seasoned CFOs and Controllers, we certainly understand the importance of having this kind of strong financial leadership! However, our experience also allows us to understand that executive financial leadership is not one-size-fits-all.

Often, companies that think they need an in-house CFO are better served by utilizing a fractional CFO or Controller instead. This is especially true for businesses below $50M in revenue, because at that level either the primary responsibilities of an in-house CFO are not needed, or they are handled by the business owner/CEO. What this means for your company is you may not need a CFO …at least in the traditional sense of the role!

A new breed of finance professionals is emerging, known as fractional CFOs."

In the ever-evolving world of finance and business, the role of the Chief Financial Officer (CFO) has undergone significant changes. Gone are the days when CFOs were primarily responsible for managing a company's finances in a traditional 9-to-5 role. Today, a new breed of finance professionals is emerging, known as fractional CFOs. These individuals are redefining the traditional CFO role by offering their expertise on a part-time or project basis to multiple companies. If you're considering a career as a fractional CFO, this article will provide insights into the role, the benefits, and what it takes to succeed in this dynamic field.

What Is a Fractional CFO?

A fractional CFO, also known as an interim CFO or part-time CFO, is a financial expert who works with multiple organizations on a contract or project basis. Rather than being a full-time employee of a single company, a fractional CFO offers their financial expertise to multiple clients. This arrangement allows businesses to access high-level financial management and strategic guidance without the cost and commitment of a full-time executive.

Whenever I read about a company embroiled in accusations of fraud, my first thought is, "Where was the CFO?" As I've written, risk mitigation is a critical element of the CFOs' responsibilities. What could be riskier than being an officer of a company engaged in fraudulent activities?

Much is written about embezzlement or malfeasance, generally carried out by a single individual with access and need. While these cases can run into significant amounts of money, they are nothing compared to systemic fraud that the entire executive team of a corporation may carry out.

Hiring a fractional (part-time) CFO is becoming increasingly popular because this type of employment engagement offers significant cost benefits. Outsourcing their CFO role allows an organization to bring someone in for a fraction of the cost because they do not incur expenses related to benefits, bonuses, payroll taxes, etc. As Michael Newsome explains when talking about utilizing fractional service providers,

“Searching for ways to optimize human capital, while fighting the inefficiencies of talent markets, is an ever-present challenge for businesses in the middle market. The human capital corollary to the engineer’s triangle (fast, cheap, reliable – pick two) seems to be availability, relevant experience, and compensation expectation... An increasingly popular way for businesses to address this issue is using fractional service providers, which have proliferated significantly in their breadth and depth of service offerings in the middle market... A fractional solution can offer a way for a business to access additional capability at a lower total cost than bringing on a full-time hire.”

And while the cost savings are clear, many companies remain resistant to hiring a fractional CFO. Their biggest fear is that doing so requires that they sacrifice on quality in a role that requires the utmost proficiency. Leadership with these types of reservations will typically ask questions like, “Is a part-time CFO as good as a full-time CFO?” or “Can you really trust a fractional CFO to perform at a high level?”

Organizations that question whether a fractional CFO can truly get the job done well for less should consider how a fractional CFO can: