An Interim CFO is an experienced finance executive who is hired on a temporary basis to provide financial and operational guidance. They are typically engaged when a company needs to fill a gap due to the sudden departure of their CFO, or when organizations are preparing for a permanent CFO hire but need assistance in the interim.
A company allows yearly leaves to its CFO. CFOs can use these leaves for emergencies or vacations. However, the company needs to function twelve months a year, and finance plays a vital role in the company’s growth. The solution to this problem is Interim CFO.
They are responsible for developing strategies and managing investment decisions. The role of an Interim CFO is the same as an in-house CFO. However, the duration of stay is different.
A company hires an Interim CFO as soon as the CFO position is vacant. Company then requires a contractual-based CFO to fulfill the company’s requirements. Additionally, Interim CFOs stay with the company until the company finds a permanent replacement.
Until the company finds a permanent replacement, an Interim CFO acts as the official CFO of the company.
Interim CFO has quite a history in the finance industry. With the stress and frustration a CFO faces, it takes work to stay for long. So to fulfill the gap for the company, Interim CFOs come into play. In crucial times, Interim CFOs work as a pillar to save the company from additional financial losses.
Interim CFOs are intellectuals with excellent problem-solving skills. They support a company in a time of financial crisis. With the evolution in finance, a CFO’s job became more complex.
The current business ecosystem comprises thousands of small startups developing every day. These startups have a limited amount of invested capital through various sources. With so many business operations, venture capitalists and angel investors are concerned about their profitability. In addition, competition among companies providing similar products or services lowers the overall industry profit margin.
In this congested business cycle, small companies cannot hire top-tier employees. As a result, capital in the company’s account is scarce, and few people handle most of the tasks. To fulfill this gap, SMEs hire Interim CFOs. An Interim CFO stays with the company until the company is profitable enough to hire a full-time permanent CFO.
Interim CFO vs. Fractional CFO
CFOs (Fractional and Interim) perform the same tasks for a company. However, there are slight differences between the two jobs.
For example, an Interim CFO works full-time for a limited time, while a Fractional CFO works part-time for a long term. Both roles do not stay permanent with the company, although different organizations hire different CFOs according to their goals.
Companies with limited financial paperwork choose a fractional CFO. They offer part-time services, and their payment is according to the hours. They operate full-time or according to their contract.
Job Description of an Interim CFO
Interim CFO is a strategy-based job. The critical role of an Interim CFO is to implement strategies to control the declining financial health of a company. They look for growth problems, including managing budget issues and expense control. Interim CFOs present their outcome directly to the CEO and Board of Directors. Some other duties of an Interim CFO include:
As the CFO of a company, the Interim CFO regularly connects with the investors. In addition, Interim CFOs find new venture capitalists and angel investors to provide capital for the company. Considering the risks, the Interim CFO provides investors with a thorough look at their company to determine the best investment options.
Leading the Finance Department
CFO is the most senior position in an organization’s finance department. They are responsible for every aspect of the financial condition a company faces. And they must deliver important lectures, conduct meetings, and guide the managers and officers working underneath. Interim CFOs also look for new talented finance professionals that can bring wisdom to the company’s environment.
Design Long-term Strategies
Interim CFO is a job for crucial times. For example, companies hire Interim CFOs when they are stuck with financial problems and no senior management can manage it. It becomes a core responsibility of an Interim CFO to design long-term strategies and work patterns. These patterns can bring solutions for the company without the involvement of financial managers.
Interim CFOs gather accurate data through financial reporting. Regular reporting helps the Interim CFO look for flaws in the current financial condition of a company. Additionally, the Interim CFO finds the best workforce for improvements.
Interim CFO Current Economic Scenario
Interim CFOs are in demand in the market. New startups hire Interim CFOs for three to six months on a contract basis. Companies today expect their CFOs to have a comprehensive approach to strategy making. Regular and quick changes in the system need a financial head who can manage all the risks involved–digital risks, in particular, to keep the company from a crisis. The level of accuracy and functionality of a CFO stays at a higher level in the digital framework.
CFOs today need to gain the vital knowledge and skills required to function in the virtual world. The traditional financial analysis methods are vanishing from the scenario. New and upgraded digital strategies overcome all these conventional methods. Additionally, the advancing needs of a business need quick solutions. Time is a crucial component for businesses in the future. That’s why, companies find the process of finding a full-time permanent CFO stressful and time-consuming.
After the pandemic, economies throughout the world are facing a backlash. Employees’ layoff and other cost-cutting situations are playing their role. The pandemic also created opportunities for companies to find part-time employees and save time with remote working.
During crucial periods, Interim CFOs can provide the company with essential strategies. Completing goals in a limited timeline is the most vital part of an interim CFO. Companies can use the opportunity to use temporary CFO services until they hire a permanent employee. Additionally, with the gap created due to the absence of a financial head, interim CFOs can provide the necessary leadership for the company’s benefit.
Qualifications required to become an Interim CFO
The qualifications required to be an interim CFO are the same as that of a traditional CFO. They are highly experienced finance professionals with an average of ten years of work experience.
The career starts mostly with a bachelor’s degree in finance, business, or economics. After the initial degree qualification, students work for mergers & acquisitions, hedge funds, and multinational financial institutions to gain hands-on experience.
Students later decide to master a particular financial field, such as
- Financial Derivatives,
- Financial Management,
- Corporate Finance,
- Financial Technology,
- Quantitative Financial Mathematics, etc.
These qualifications help in building the groundwork for senior management jobs. All these qualifications, work experience, and skill sets become the foundation for an expert finance professional. Interim CFOs can be freelancers. You can hire an interim CFO through various freelance websites. There are also notable umbrella companies that connect interim CFOs with client companies.
Problems with an Interim CFO
Everything comes with a price. There are specific problems that might arise while hiring an interim CFO. These problems can backfire on the company’s economic situation if not appropriately addressed.
Interim CFOs and companies have a limited connection for a limited time. The timeframe is insufficient to create strong relationships between employees and employers. In such a situation, one problem that emerges is the CFO’s loyalty to the company.
Loyalty in business ethics is the devotion of an employee towards their employing company. Every employee shares a bond with their company. Loyal employees work hard to derive the best outcomes for the company. It is essential in the business environment for a secure trade structure.
Interim CFOs work on a contractual or part-time basis. In some cases, the CFO might not feel motivated enough for a company’s performance than a full-time employee. Company management should regularly interact with the interim CFO on business decisions, strategies, and team building.
The company’s financial decisions are made with the ideas and teamwork of the entire finance department. Every department member plays a crucial role in decision-making by giving their input. Individual decisions can be complex to implement and produce a pessimistic outcome.
A full-time CFO considers all the information from finance managers and lower staff before deciding. Contradictorily, interim CFOs have minimum interaction with the entire finance department, and their decisions have a more solo approach. A solo approach to decision-making can be complicated and dominated due to an employee’s biases. An entire group of financial professionals should work on business decisions to prevent a negative outcome.
Teamwork is a collective effort by a group of employees to generate more efficient results. These employees have a common goal to address, and they find different approaches and solutions to address the issue. Financial issues such as project finance or budget cuts are core objectives of the finance department. The department works on different project elements to provide logical and positive solutions. CFOs arrange regular meetings with the staff while making decisions.
An interim CFO works part-time, and their presence in the office or online is limited. Lower management may find it challenging to connect with them regularly. A company’s top management is responsible for creating the events and environment required for the interaction between employees in the finance department and the interim CFO.
According to payscale, an average interim CFO makes $82 per hour or $127,920 annually. The salary ranges between $68,000 for entry-level CFOs to $240,000 for senior professionals. These ranges vary according to the CFOs work experience and the organization.
Interim CFOs work less than 30 hours per week. Limited time offering lowers their average monthly wage. Small companies that cannot keep a permanent CFO use this time limit to their advantage in cost-cutting.
How to Hire an Interim CFO
To hire an interim CFO, a company can use online freelance websites. They can filter and hire the best option available according to their requirements. A company can also contact an umbrella company that manages part-time finance professionals. Although, the hiring rates at an umbrella company are higher than a freelancer. There is also an option to negotiate on freelancing sites.
The sudden leave or absence of a company’s financial head is the most feared problem in any business industry. Every company requires a CFO to manage their investments, budgets, profits, and debt obligations. Interim CFOs can help a company in these crucial conditions. They can provide part-time services to address the ongoing situation and create a stress-free company environment. In addition, they are likely to keep the investors faithful to the company.
New startups are pushing the demand for interim CFOs to a higher level in the current market. People working in finance now have exclusive freelance and part-time jobs that pay more than many finance careers. This new market will bring more professionals to work for fresh startups and small companies with limited investors’ capital.