Part-time CFOs are helping take small businesses to the next level. If you run a startup or a small- to mid-size company, you probably can’t justify hiring a full-time chief financial officer. But, you do need some level of financial help from an expert, someone who can cast a trained eye on your cash flow, margins, key performance indicators, and overall profit picture while you concentrate on your team, your products, and your strategies for growth.
What happens when you have to navigate a period of financial disruption and that CFO isn’t the right person to see you through it? Or your CFO leaves abruptly in the middle of a critical time? In either case, you need to hire a CFO. So, when should you hire an interim (temporary) CFO, or a fractional (part-time) one?
An Interim CFO vs. Part-Time CFO: What’s the Difference?
Interim CFOs are finance experts who come in, usually on a full-time basis, typically for one to three months, to help steer a company through a financial crisis, operations change, preparation for a sale, or the gap between one CFO’s departure and the hiring of a new one.
A part-time CFO is a critical partner during times of transition. Whether you’re a startup maturing from a Series A funding round, a private equity firm looking for an experienced leader to step in and help manage a portfolio company, or a later-stage company looking for someone to perform CFO duties while the search for a full-time CFO is underway, the skills and experience a part-time CFO can provide are invaluable to help your company grow and thrive.
When Do I Need an Interim CFO?
An interim CFO doesn’t typically work with startups although it is not impossible. It’s more likely to be middle-market companies who call on an Interim CFO to come in on a full-time basis for a very short, defined period of time. Usually, there is a catalyst, something undesirable happening to the firm’s financial health. Companies generally don’t bring in an interim CFO when things are going well.
Some signs that your business may benefit from an Interim CFO include:
- Your Business is Enduring a Period of Transformation: Every organization undergoes periods of transformation at some point. As a company expands, growing pains often result. Financial reporting issues, accounting errors, or maybe lack of systems and processes altogether can negatively impact an organization.
- Preparation for Exit or Transaction: An Interim CFO is the greatest insurance policy for company owners going through a transaction to sell, refinance, or acquire another company. The role of the CFO in Mergers & Acquisitions is critical to a successful transaction. This is especially true for companies who haven’t had to report to outside investors, a sale or merger may require a whole new level of financial reporting and accountability that most companies are not ready for.
- Distressed Financial Situations: When a company is out of covenant on loans, is experiencing a decline in revenue, or suspects fraud, an interim or fractional Chief Financial Officer can help. With experience in turnarounds, an experienced Interim CFO assesses what is causing the organization distress and rapidly creates and implements a plan to address the crisis whether it be re-negotiating with creditors, recapitalization or even liquidation.
- Assistance in Financial Planning and Analysis: An Interim Chief Financial Officer can help an owner with cost accounting, putting good financial systems and accounting policies and procedures into place. Interim CFO services can be critical in properly recognizing revenue, cash flow analysis, budget forecasting, and financial modeling. You no longer need to wonder what projects are profitable.
- Financial Controls, Process & Procedure Support: As fast-growing companies expand, the finance function must grow up as well. An Interim CFO provides strategic solutions to help navigate through growth such as Sarbanes Oxley Compliance (SOX), BPO, implementation of an ERP system, budgeting and forecasting, risk and compliance, and even finding a permanent CFO to move the company forward.
What Are Some Benefits of An Interim CFO?
- Experience: Interim CFOs have encountered a variety of different business situations, and have a span of knowledge that other candidates may not have. With these experiences under their belt, an Interim CFO will be able to direct your financial decisions in the best possible outcome.
- Short-Term Specialist: Often, Interim CFO’s are hired to solve a problem. With this being said, these individuals focus on performing the task at hand; and once this task has been completed, they are unlikely to be heard from again. The average duration of an interim CFO contract is between a month and three months; usually, that’s enough time to work through the financial issues.
- Gain a Fresh Perspective: Many companies get stuck in a continuous routine of performing the same day-to-day financial actions day. When your business hires an Interim CFO, they are able to bring an outside perspective on the financial decisions that your business is making and make suggestions on how to better reach your financial goals.
- Focus on Bettering Your Business: Finding an ideal CFO candidate can be difficult as well as time-consuming. An interim CFO is a knowledgeable short-term solution to your problem. Rather than worrying about the finances of your business, by hiring an experienced interim CFO, you will be able to focus on the task at hand–finding your ideal CFO candidate.
- Affordable Instant Solution: Hiring a full-time CFO can be costly, and if your business is just starting out, you may not be able to yield these costs. By bringing in an interim CFO, you are able to obtain the hired help you need without the added costs.
When Should My Business Consider a Part-Time CFO?
Businesses require expertise and experience to drive profitable, sustainable growth. A Part-Time CFO can identify new growth strategies and provide methods to reduce costs to improve your business’ profitability, at a fraction of the cost of a full-time CFO.
Some assistance that a Part-Time CFO can bring to your business include:
- Experienced Cash Flow Management: Manage your capital runway, debt obligations, and ensure the ability to invest in new projects.
- Profitability Optimization: Identify opportunities to improve margins through granular analysis of channels, service lines, products, and more.
- Preparation For an Exit: Prepare your company with defensible financials and a logical strategy before an interested party comes calling.
- Fundraising Support: Plan for the timing, format, and level of funding required to support business operations.
- Assistance In Internal System Implementation:– Put systems and controls in place across your business to accelerate growth.
- Optimal Business Strategy: Setting a strategy for your business, after a thorough analysis of your entire business environment, will give your company the best chance for success.
- Developing Merger and Acquisition Strategies: Make informed business decisions when considering M&A opportunities. We can evaluate, negotiate and close transactions and assist in the successful transition into your existing business.
Advantages of a Part-Time CFO Service
- Cost-Savings: Hiring a full-time CFO can be costly, in fact, researchers estimate that an average cost of an in-house accountant can cost an average of $250,000 per year with salary and benefits combined. Paying for a part-time CFO service relieves the cost burden associated with a full-time CFO. The company can skip the recruitment and hiring costs, as well as the associated salary. Furthermore, as a third-party employee, the business does not need to pay for benefits or be concerned with offering costly perks to incentivize retention when utilizing a part-time CFO.
- Flexibility: When hiring a part-time CFO service, there are a variety of different services that your business can utilize. The service can be used for as many, or as few tasks that your business needs, creating a cost-effective solution that is perfect for small businesses.
- Immediate Financial Expertise: Hiring a part-time CFO service offers immediate help to your business. Since the individual is already trained in a variety of accounting and finance-related tasks, there is no need for endless hours of training. A part-time CFO is able to give your business accurate answers to the financial questions that you may have.
- Experience: Hiring a CFO from a part-time CFO service will be more proficient at performing accurate results to your business’s financial solutions and will have experience with relevant industries or business types. This is an essential distinction as you will be putting the future of your business in their hands.
- Helps Raise Business Capital: A Part-Time CFO will be able to provide your business with expert advice when it comes to managing your business’s funds. With proper management of your business’s finances, you will be able to set the goals that you need in order to raise the overall capital of your business.
Final Thoughts
One reason to clarify the difference between these two types of finance professionals is that fractional CFOs often use the term interim CFO. Another is that people sometimes think they need an interim CFO when they really need a fractional CFO. And one last piece of advice for small- to mid-size business owners and upper management: One of the best reasons to hire CFO services is if you are spending more time doing administrative, finance, and back-office tasks than on growing your business.
Limitless Investment and Capital’s Part-Time CFO and Interim CFO Services in Phoenix & Denver
Limitless Investment & Capital provides growing and established organizations with experienced CFO-level talent on an outsourced, part-time basis at a fraction of the cost of a full-time employee. Our CPAs and consultants provide specialized skill sets to navigate times of transition when you can’t afford to be without a CFO.
We price our service offerings very sharply at rapid mandated turnaround times and place exceptional quality CFOs, Financial Controllers, and Analysts on the project, by leveraging on our varied and wide resource database pool.