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Want to gain full control over your firm’s finances but aren’t sure where to start? You’re not alone and you’ve come to the right place. Read on and reach out if we can lend a hand.

When Temporary CFO Services Might Not Be Right For You

temporary cfo services

Sooner or later, circumstances lead many small business owners to consider engaging a temporary CFO. When you find yourself in that mode, you might wonder, is now the right time to engage a CFO? What is the opportunity cost of waiting to hire one? Is a temporary finance leader the way to go? If not, what are the alternatives?

To help you think through these and other related questions, we’d recommend you begin by reading our article that establishes what a CFO service is and how to know if you need one. A flavor of CFO service unto itself,  temporary CFO services do have some business situations where they can be a compelling solution. However, more often than not, an interim solution will sell your business short. We’ll discuss both scenarios in this piece.   

WHEN A TEMPORARY CFO SERVICE MAY BE APPROPRIATE

1. A Cash Crisis

When your business is faced with a defining moment, such as a cash shortfall, the need for a CFO is unquestioned. A cash crisis is not something that can be put on the back burner. The role of a CFO during such a crisis is to very quickly establish and begin using the right cash management tools to equip the decision makers with the information required to successfully navigate the shortfall.  The CFO must know where to look to identify the various “levers” to strike the delicate balance between managing an organization’s sources and uses of cash.

That CFO should also be able to articulate and be sensitive to the trade offs associated with certain options. For example, would a delayed payment to a certain vendor risk shutting off access to the mission critical service they provide? Or which customers would jump at the chance to pay early to secure an incremental discount? How about the discount off market value that the firm would absorb if it were to sell a particular asset without much lead time?

A temporary CFO who is seasoned at cash management practices could certainly assist with such an engagement. However, by no means would this set of circumstances be limited to temporary resources. In fact, as we’ll discuss below, there are real benefits to ongoing resources that should be weighed even when a temporary resource could get the job done.

2. Staffing Issue for Finite Period of Time

If your company normally operates under the guidance of a CFO and the sole reason you are without one is due to a sabbatical or medical leave, a temporary CFO might be an excellent option. A disruption in financial leadership could be detrimental to your business and the right temporary resource could ensure your operations don’t suffer with a void at the financial helm of your firm.

A temporary CFO should be able to step in oversee day-to-day accounting and guide ongoing financial decisions. To ensure smooth operations, continuity of financial leadership is important and temporary CFO services could be just what your firm requires.

3. One-Time Projects 

Every company has one-off projects surface from time to time that require an experienced financial hand in the lead role. If the ongoing financial management needs of your firm are truly light and can be handled by the controller and CEO, perhaps such a project is another appropriate time to consider a temporary CFO service.

On such example is the due diligence required in the lead up to a potential merger, sale, or acquisition. Finance report generation, market and industry analysis, financial modeling and negotiations are only some of the important activities that a CFO (temporary or otherwise) could drive in this case. There's no doubt that sound financial leadership for such projects enhances the probability of success.

WHY A TEMPORARY CFO SERVICE Often Falls Short

While certain situations may call for temporary CFO services, there are some significant potential drawbacks that come hand in hand with a temporary CFO engagement when compared to engaging an ongoing CFO service. We’ll cover those here so you may enter such a relationship with your eyes wide open.  

Will Lack Critical Context

Among the benefits of an ongoing CFO relationship is that your CFO knows you, your business and its nuances, your industry and all of the key decisions made over time. They understand why decisions were made, what resulted, and how those results impact the strategy moving forward. Relationships, trust and the basis for sound judgment don't happen overnight so understand a temporary resource will lack this important context.

Won’t Have Time to “Do it Right” 

It takes time (and first-hand experience in a similar business in a given industry) to thoroughly understand what makes a business and market tick. Don't expect a temporary CFO to step in and unlock the secrets of your niche in a few weeks. 

Moreover, key financial or accounting initiatives take time to design and implement. For example, a new or improved accounting process can easily take 3 to 4 months to build. To get a sense for what’s involved in such an effort, read our article on the steps required to take control of your finance function. Having a resource rush through the process to keep the cost under control will end up costing far more over time due to the collateral damage of poorly designed or implemented changes. 

As a result, we would caution you from thinking of a temporary CFO as a call-a-friend button where he or she parachutes in to fix one thing, allowing you to revert back to leaning only on a bookkeeper or controller. You're bound to be faced with another need sooner rather than later and the lack of continuity can take a serious toll. 

Won’t be Around to “See it Through”

Your business is far from stagnant so the best laid plans will need to evolve. While necessary, plans always need to be adjusted during and after implementation, as you learn from the process. A temporary CFO or consultant may deliver a slide deck with a plan with all the right intentions, but they won't be available to learn and react as is invariably required in order to turn a plan into reality.  

Your Needs Will Outlast Your Temporary CFO

Even when a temporary CFO effectively delivers on an engagement, their work provide will soon be rendered obsolete. Because of their dynamic nature, companies have an ongoing need for financial leadership because their finance function must adapt to their ever-changing needs. Wouldn't it be a shame to get a temporary CFO up to speed on one initiative and have to invest similarly when the next need arises?

WHAT TO DO WHEN A TEMPORARY CFO SERVICE IS NOT THE RIGHT FIT

If you began reading this article intent on engaging a temporary CFO, you may now have some reservations about staying that course. If so, you may want to understand your alternatives.  We'll focus here on the most logical alternative: an ongoing CFO service.

An ongoing CFO service may take several forms. It could be part-time CFO who oversees some or all aspects of your finance function along with oversight of your bookkeeper and/or controller. But there are also services where you can outsource the entire finance function, where the service provider serves as the CFO, controller AND bookkeeper.

Engaging only a CFO does bring with it certain inefficiencies, however. A CFO working with your internal team will try to develop a process that limits the amount of time he or she needs to spend on true CFO tasks. But such efforts are typically thwarted to varying degrees because they weren't built from the ground up to work across company lines. 

On the other hand, an integrated approach can be a highly cost effective solution since the team and process are selected and designed to maximize the portion of the work absorbed by the lowest possible cost resources. In other words, the process is thoughtfully designed so the bookkeeper can shoulder as much of the day-to-day work as possible because the bookkeeper is the least expensive resource. The controller, in turn, is tasked with as many of the remaining tasks as practical because a controller is far less expensive than the CFO. Which leaves the CFO to perform only those tasks that a bookkeeper and controller are unqualified to tackle. 

And since the CFO designed the accounting process that his or her subordinates follow, he can have a high level of confidence that the work product they hand to him is ready for action. Unfortunately, the same cannot be said of the deliverables from an internal bookkeeper and controller who the CFO has limited ability to train and manage. As a result, the CFO must sink too much time into fixing the data he or she is handed and the cost of that valuable time starts to add up. 

Refer to our article on the cost of CFO services to get a better sense for just how cost effective CFO services have become. Still need help navigating the maze of options when it comes to engaging? Read our Buyer’s Guide for Outsourced CFO Services.

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Dave Robinson

Written by Dave Robinson

Driven Insights founder, author of "Competitive Advantage through Financial Management", writes about informing business decisions.

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