Young companies are often rich in ideas but short on cash. They frequently need a financial expert yet don’t have the budget to hire one.
For many companies, the answer to this dilemma is to hire a temporary or part-time chief financial officer. Temporary CFOs, who often have experience working for big accounting firms or major corporations, can offer a wealth of financial management expertise to growing companies. Many have helped companies in bankruptcy or financial distress, so they know how to help businesses on a tight budget. And because you don’t pay them a full-time salary, you get top expertise at a more affordable price.
Why Hire a Temporary CFO?
There are many situations in which small businesses can use the assistance of a part-time or temporary CFO, such as the following.
- To complete a short-term financial project
- To reassure private funders or bank loan officers that the company is fiscally responsible
- To get a company’s financial department up and running by creating accounting systems or writing company accounting policies
- To assist a business with the required documentation for filing federal or state taxes or for support during an audit
- To help prepare for a merger, acquisition, or public offering. The CFO will perform due diligence — documentation of both a company’s financial health and the finances of any proposed partner or buyer.
Finding a Temporary CFO
A company’s top financial officer fills a key role that requires complete trust. It’s important to check references thoroughly before hiring a temporary CFO. There are major agencies that provide temporary CFOs, but word-of-mouth is an even better way to find the right candidate. Work your network of industry colleagues to find companies that have used temp CFOs in the past. Many of these CFOs temp as a career choice, not because they’re between jobs, so the same CFO may be available for your assignment.
Finally, many temporary CFOs are open to becoming permanent CFOs again. If you’re considering a permanent hire, be sure to ask candidates if they’re open to working full time when your company grows.
A temporary CFO arrangement is usually a contract for a set timeframe, which might be a week or a year. Temp CFOs usually want a flat retainer amount. Depending on your company’s needs, they might work for your company one day a week, part time for several days, or full time but only for a few weeks.
Roles of a Temporary CFO
Depending on the company and situation, a temp CFO may do the following.
- Handle company funds
- Provide strategic guidance to the chief executive officer
- Help the company seek private-investor funding or bank financing
- Assist in deal negotiations
- Perform due diligence research on possible acquisitions
- Develop revenue-forecasting models
- Develop and institute financial policies
- Provide a company valuation for possible buyers
- Create reporting systems
- Help determine capital needs
- Advise on changes in accounting best practices and business-tax laws
- Assist in hiring other finance-department workers such as a controller or finance manager
If a company takes on a venture capital investor or begins preparing for an initial public offering, it’s usually time for the interim CFO relationship to end in favor of hiring a full-time CFO. Both venture capitalists and the Securities and Exchange Commission will want to see that a permanent CFO is overseeing the company’s finances.