The hiring of a Chief Financial Officer (CFO) is a major decision that most CEOs and business owners of both small and large companies will need to think over. CFOs play a number of critical strategic and operational roles within a growing business, including handling cost and cash flow management, profit analysis and improvement, financial and operational reporting and leading debt and equity capital raises.
Despite their importance, or possibly because of it, company management teams are often hesitant to bringing on a full time CFO. An increasingly popular solution revolves around hiring part-time CFOs.
Bringing on a CFO is a big decision for any company, and CEOs and business owners within the San Francisco Bay Area can benefit from asking themselves a series of basic questions as guideposts to inform the decision making process.
A CFO provides the CEO or business owner with the financial information they need to make informed strategic business decisions, manage a wide array of internal processes from operations, HR, to legal and compliance, while ensuring that financial and operational reporting are expertly maintained. All of this helps to grow the company more profitably in terms of revenues, costs, profit margins, and cash flow.
While nearly all companies can benefit from the services of an experienced CFO, the exact need for a CFO will vary depending on the type of business.
For earlier-stage startups, hiring a part-time CFO can serve as an important inflection point for the business’ growth, propelling the company through funding rounds and into the public markets or towards attractive acquisition offers.
For small to mid-sized businesses, a part-time CFO might be needed as the company has grown to a point of unwieldy complexity, or to restructure the internal finance team in order to streamline reporting and increase operational efficiencies and profit margin.
For portfolio companies of private equity and venture capital firms, a CFO will be required at all steps of the way to ensure that the portfolio company is able to keep up with the investment firm’s rigorous financial reporting requirements. Furthermore, having a seasoned expert CFO at the helm of the firm’s portfolio companies is essential for ensuring that the portfolio is being managed correctly for future exits, ultimately helping the investors hit their targets.
An experienced part-time CFO can benefit all different types businesses at nearly all stages in a company’s life cycle.
The CFO function is essential if a business ever hopes to make it to the next level in terms of successful operational scale and increased revenue, and hiring the right individual at the right time is of paramount importance for long-term success and valuation.
Luckily for the savvy business owner, hiring a full-time CFO isn’t the only answer. For companies seeking immediate strategic financial and operational guidance, hiring an expert interim or part-time CFO is a great solution to get the company into better financial shape without committing to a full-time CFO.
Looking to outsourced CFO firms vastly increases the size of your candidate pool, which leads to significant advantages in terms of the quality of experience, the speed of hiring, and the candidate’s flexibility around the specific work arrangement and employment dates.
Part-time CFOs contribute to companies in essentially the same way a full-time CFO can. Some of the duties of temporary or part-time CFOs include: financial and operational reporting, profit margin and cash flow analysis and improvement plans, budget development and monitoring and banking and alternative financing sources.
The exact function of the CFO will vary a bit depending on the size and nature of the business. At smaller companies, a part-time CFO will typically wear many hats, handling traditional CFO functions while also overseeing a variety of business functions ranging from legal to HR to corporate governance. At a larger company, the responsibilities of CFOs will remain in the traditional domain of corporate finance teams.
CFOs at the portfolio companies of venture capital and private equity firms must be able to tailor and customize their reporting for their respective owners. For example, CFOs for venture capital portfolio companies will focus on reporting growth metrics, while CFOs for private equity-backed companies will be focused on cash flow metrics.
The primary difference between the function of a part-time CFO and a full-time CFO revolves around the CFO’s impact on management and culture. For mid-sized and smaller businesses, many of the functions of a CFO can be done on a part-time basis and can even be completed while working remotely. A business may want to consider hiring a full-time CFO once their organization has scaled to the point that their CFO would be managing dozens of individuals on-site.
Skilled part-time CFOs will have years of experience in their role and are experts when it comes to joining new teams, quickly acclimating to new business environments, and executing the specific duties within their mandate.
Businesses can take a variety of steps to make sure they get the most out of their engagement with a part-time CFO. Prior to hiring a part-time CFO, companies can prepare all tasks that less experienced personnel would be able to handle. For example, migrating the company’s financials to an accounting system like QuickBooks. This will free the part-time CFO up to immediately dig in and spend their time on high-impact initiatives, such as building out the internal finance team, connecting with investors, analyzing detailed financial reports, and developing plans for increased profitability and long-term business success.
There is no doubt that CFOs serve as important strategic and operational partners to CEOs, helping the CEO understand the business’ direction and future prospects while also preparing the business for investor and board presentations. While choosing the correct full-time CFO is a critical decision, CEOs can mitigate this risk by hiring an experienced part-time CFO. This allows for a test run for a full time hire without the associated costs and equity investment. Given the high quality of talent on contract CFO platforms, you can sleep well knowing that an experienced CFO is leading your company’s finances.