What is an Interim Chief Financial Officer: Roles, Benefits & How to Choose

Interim Chief Financial Officers (CFOs) are becoming increasingly essential for companies in transition. By providing financial planning, analysis, and rapid deployment of expertise, interim CFO services can help companies in financial distress or leadership gaps. 

Whether it’s a sudden departure, a big project, or financial restructuring, an interim CFO can provide the knowledge and leadership to steer the company through tough times. 

This blog explains the roles and benefits of interim CFOs and how to choose the right one for your business. 

What is an Interim CFO? 

An Interim CFO, also known as a temporary or contract Chief Financial Officer, is a highly experienced financial professional brought in on a short-term basis to provide financial leadership and expertise. They are often hired to fill a gap in financial management, provide strategic guidance, and help companies through complex financial situations. 

Whether for a few months, a year, or more, interim CFOs can manage financial operations, ensure accurate financial reporting, and contribute to strategic planning. Their role is vital to an organization’s financial health and stability during transitional periods. 

The Interim CFO Role 

Leadership and Governance 

An experienced interim CFO brings leadership and stability during times of change. They address problems, implement ERP systems, and prepare budgets and forecasts. They step into the role with deep financial management knowledge so the business can keep running smoothly. 

Financial Reporting and Control 

Interim CFOs are responsible for financial oversight, including preparing and analyzing financial statements, ensuring financial compliance, and providing insight into the company’s financial health. They also play a key role in implementing and improving financial controls to maintain good financial practices during times of change, such as rapid growth or mergers and acquisitions. 

Strategic Planning and Advisory 

Interim CFOs often play a crucial role in strategic planning. Documenting and optimizing financial processes are critical to support strategic objectives during this period. They work closely with the executive team to develop financial strategies to support the company’s goals, whether that’s growth, cost reduction, or capital investment. 

Project Management 

In some cases, interim CFOs are brought in to manage specific projects, such as mergers and acquisitions, system implementations, or financial turnarounds. They often work with portfolio companies of private equity firms where their expertise is key to optimizing operations and ensuring successful integration and return on investment. They can ensure these projects are delivered efficiently and effectively. 

When Do You Need an Interim CFO? 

There are several situations where an interim CFO can be useful: 

• Financial Crisis: When a company is in financial trouble, such as cash flow problems or financial reporting issues, an interim CFO can provide the expertise and guidance to stabilize the company’s finances. Their experience managing financial crises can be the key to turning the company around. 

• Leadership Gap: If a permanent CFO leaves or cannot perform their role, an interim CFO can fill the gap and ensure continuity of financial leadership. This prevents disruption to financial operations and maintains investor and stakeholder confidence. 

• Strategic Planning: During major changes such as mergers or acquisitions, an interim CFO can provide strategic guidance and help develop financial plans to support the company’s goals. Their insight is critical in navigating the complexity of such change. 

• Family-Business Succession Planning: By developing detailed succession plans, interim CFOs can facilitate smooth transitions in family-owned businesses. They help ensure that financial stability is maintained during the transfer of leadership, mitigating risks and safeguarding the business’s legacy. 

• Brace for a Sale:  An interim CFO can prepare a company for sale by ensuring its accurate and current financial records, identifying potential financial obstacles, and optimizing financial performance to enhance the company’s attractiveness to potential buyers. Their expertise can streamline the due diligence process, ensuring the company is presented in the best possible light to maximize its sale value. 

• Prep for an IPO: An interim CFO can provide critical expertise in preparing a company for an IPO. They ensure that financial statements are accurate, compliant with regulatory standards, and that all necessary disclosures are made. They also help develop a strong financial narrative to attract potential investors and guide the company through the complex process of going public. 

• Mentor an Internal Resource: An interim CFO can provide invaluable mentorship to internal finance team members, helping to develop their skills and knowledge. By sharing their extensive experience and insights, they can groom potential future leaders within the organization, ensuring a smooth transition and continuity in financial leadership. 

• Financial Reporting: Companies looking to improve their financial reporting and accounting systems can benefit from the expertise of an interim CFO. They can implement new systems and processes, ensure compliance, and improve financial data accuracy. 

Why Hire an Interim CFO 

Instant Expertise 

Interim CFOs bring a wealth of experience and knowledge that can be applied immediately to the business. An interim CEO must focus on building relationships and understanding the organization to establish relationships with key stakeholders and navigate potential issues. This is particularly valuable when the speed of decision-making and strategic planning is critical. 

Cost Effective 

Hiring an interim CFO can be more cost-effective than recruiting a full-time CFO, especially if the need for their services is temporary. You can get high-level expertise without a long-term financial commitment. 

Objective View 

As external advisors, interim CFOs bring an objective view to the organization. Internal politics do not influence them; they can give unbiased advice and guidance. 

Flexibility 

Interim CFOs are flexible. You can scale up or down financial leadership to suit your needs. This is particularly useful for companies with fluctuating demand. 

How to Manage an Interim CFO 

Managing an interim CFO requires clearly understanding their role and responsibilities and good communication and collaboration. Here’s how: 

• Define the Role and Responsibilities: Make sure the interim CFO knows what they are responsible for and the scope of their work. This will set expectations and deliver results. 

• Establish Communication Channels: Communication is key to informing the interim CFO of the company’s financial situation so they can provide timely guidance and support. 

• Provide Resources and Support: Ensure the interim CFO can access the necessary resources and support to do their job. This includes financial data, tools, and team members. 

• Monitor Progress and Feedback: Monitor the interim CFO’s progress and give feedback. This helps them meet the company’s expectations and contribute to the financial goals. 

How to Select the Right Interim CFO 

What Are Your Needs? 

Define what you need from the interim CFO. Understanding your requirements is the first step in selecting the right candidate, whether to manage a financial crisis, oversee a big project, or fill a temporary gap. 

Check Credentials and Experience 

Look for candidates with a track record and experience in similar roles. Ensure they have the qualifications and expertise to meet your organization’s needs. 

Culture Fit 

While interim CFOs are temporary, it’s still important to consider cultural fit. They should be able to slot in with your existing team and understand the organization’s values and culture. 

Ask for Recommendations and References 

Ask for recommendations from people you trust and check references. Talking to previous clients will give insight into the interim CFO’s skills and work style. 

Clarify Terms and Expectations 

Before hiring, ensure both parties are clear on the terms, expectations, and duration of the engagement. Sorting these details upfront will prevent misunderstandings and ensure a successful partnership. 

How Much Do Interim CFO Services Cost? 

Interim CFO fees vary greatly depending on company size, industry, location, and the interim CFO’s experience and qualifications. Here’s a general guide: 

• Hourly Rate: Interim CFOs can be paid hourly depending on their experience and qualifications. 

• Daily Rate: Some interim CFOs are paid a daily rate that reflects their expertise and the role’s demands. 

• Retainer Fee: Sometimes, companies pay an interim CFO a monthly retainer fee. This provides a steady income for the interim CFO and ensures their availability. 

• Equity: Interim CFOs are rarely offered equity in the company as part of their remuneration. This can be good for the company and the CFO, aligning their interests and performance. 

BrainSell Can Help If You Need an Interim Chief Financial Officer 

Interim CFOs are a valuable resource for organizations going through change or needing specialist financial expertise. 

Now that you know the role, its benefits, and how to select the right one, you can make a decision that will help your organization navigate the challenges and achieve its financial goals. But we’re here to help! Connect with BrainSell to see how our fractional services can help you find an interim chief financial officer who can help you grow and scale!