By Linda Rubinstein
FLG Partners is a leading solution for CEOs, boards and management teams when it comes to sourcing experienced interim CFO talent. Whether your company is a small, publicly traded biotech preparing to raise its next equity financing or a large multi-national firm in need of restructuring, margin improvement and cash management, FLG Partner’s CFO consultants have “seen it” and “done it” all.
How Does Hiring an Interim CFO Differ from Hiring a Permanent CFO?
While you might assume that hiring an interim CFO is no different than hiring a permanent one, there can be important differences between the spec for a company’s interim versus its permanent CFO. Interim CFOs may also be part time, while permanent CFOs are nearly always full time. Finally, both the interim and permanent CFO may oversee the same set of overall finance responsibilities but the near-term priorities for the interim CFO may vary from the longer-term priorities for the permanent CFO.
And remember that when hiring your interim CFO, even if you are also actively recruiting a permanent CFO, you may need your interim CFO for weeks to months so it is critical you hire the right person, who can seamlessly transition on to your team, manage all company priorities and then potentially help select and onboard your permanent CFO hire.
What Really Matters When Choosing an Interim CFO?
So how do you decide which interim CFO is right for your company? What attributes are critical to home in on in interviews of prospective interim CFO candidates?
I recommend that you focus on six key areas when selecting an Interim CFO:
- Right mix of skills and on-the-job experience
- Strong evidence of being able to manage a team
- Domain and industry familiarity
- Good fit with company culture
- Good judgement
- Demonstrated “pivot” potential
The Right Mix of CFO Skills and “On the Job” Experience
CFO candidates can differ dramatically from one another in the depth of experience and mix of finance skills they bring to the table. Here are typical areas of scope and impact for Chief Financial Officers:
- Financial Strategy: Assessing capital needs, fundraising and liquidity planning, determining the right kinds and mix of financing (equity/debt), acquisition and exit planning, partnerships, going public, etc.
- Executing Financing Transactions – Investor and Wall Street Relationships: Executing equity and debt transactions, reaching out to new investors and cultivating existing investor relationships, whether VCs, growth capital providers, fixed income investors, etc. Also, for public and aspiring public companies, cultivating public investors, investment banks and sell-side equity research analysts.
- Contributing the Finance Perspective to Enterprise Matters: Actively providing a financial “lens” for reviewing key management decisions, whether weighing in on product strategy, organizational restructuring, compensation or strategic decisions. Assisting with C-suite priority setting.
- Financial Planning and Analysis: Developing forecasts and budgets, long range plans and capital expenditure budgets. Determining key success factors (KPIs) and metrics, testing scenarios, making decisions such as make vs buy assessments, and evaluating the potential return on prospective investments.
- Finance Operations: Setting up and monitoring internal controls. Paying company bills (accounts payable), invoicing and collecting from customers (accounts receivable), payroll, paying employee expenses and business partners, managing inventory and cost of goods.
- Accounting and Financial Reporting: Closing the books monthly, quarterly, and annually. GAAP accounting policies and procedures. Developing and producing management reports. External reporting such as to the SEC and other regulatory bodies. Managing financial audits.
- Treasury: Cash and investment management, working capital management, and banking relationships (credit, growth capital requirements).
- Tax: Compliance (local, state, federal and international, as applicable). Tax provision for GAAP financial reporting. Tax credits, intercompany transfer pricing, audits, and other tax related issues.
- Systems: Selecting, implementing and managing financial and related software and systems.
- Risk Management and Insurance: Insurance needs can include general liability, property and casualty insurance, industry-specific insurance such as cargo or product liability insurance, and management liability insurance against both employee and shareholder actions.
- Oversight and Collaborative Decision Making: CFOs may oversee or collaborate closely with executives responsible for other areas, including purchasing, information technology (cybersecurity is a big topic for public company audit committees), human relations and legal (for example, ensuring timely SEC filings), among others.
You should carefully match your company’s current and future priorities against these key areas of need and hire an interim CFO who has demonstrated expertise as well as depth of job experience in the right areas.
Ability to Manage a Team
A CFO must be able to lead effectively and to manage the finance team even if they didn’t participate in hiring them. An interim CFO must be able to hit the ground running to set a stellar example for the finance team, mentor team members and keep them engaged and motivated. In an era of remote work, a tight labor market and the post-pandemic Great Resignation, this is even more important. And while most companies prefer that a permanent CFO hires their team, there are many situations in which companies cannot afford to let critical finance team gaps remain unfilled (controllers, FP&A VPs, accounting directors etc.), and an interim CFO may have to make hiring calls.
I have often faced this situation as an interim CFO. At one public company, for example, a key responsibility of mine was to keep the finance team together and prevent turnover while we implemented a new accounting and purchasing system and dealt with SOX 404B challenges. A strong interim CFO can pull this off, but it takes experience and effort.
Domain and Industry Familiarity
Another important way you can significantly reduce the learning curve for your interim CFO is by choosing someone already familiar with the issues and finance intricacies associated with your sector. Examples include biotech, where a CFO must understand the development timelines and regulatory requirements to get new drugs approved; SaaS, where a CFO must understand key benchmarks around annual recurring revenue or go-to-market performance; and consumer packaged goods companies, where an understanding of e-commerce and related metrics is required. Similarly, if your company is poised to go public, you need a CFO who has already been down this road as preparing to go public is not for the faint of heart.
To engage the right interim CFO, you’ll need to determine which CFO experiences, finance skills and domain/industry knowledge map to your company’s issues and business priorities. These can be radically different depending on your industry, stage of development, private versus public ownership structure and vision for success.
- A small, private, preclinical-stage biotech company might need an interim CFO with life science experience to help with financial strategy, fundraising, financial planning, evaluating licensing deals and considering whether to outsource various R&D or administrative activities. The finance team is likely to be small.
- A high-growth software company preparing to go public via an IPO would benefit from an interim CFO with sector experience and Wall Street credibility and will likely need financial strategy, financial reporting, and public company experience.
- A vertically integrated and multinational operating company would likely need an interim CFO with strong finance operations, financial planning and analysis, financial reporting, treasury, and tax planning experience.
Breadth and depth of experience are a major plus for an interim CFO. I’ve been interim or consulting CFO for four publicly traded companies and another handful preparing to go public. My companies’ various needs have included going public by conventional IPO; going public by reverse merger or combining with a SPAC; complex accounting, financial reporting and SOX mandates; creating a long-term business plan aligning fundraising with value driving milestones; getting a handle on spending and then downsizing operations; and implementing new systems.
In my experience, some companies don’t pay enough attention to a CFO’s fit with company culture. CFOs are often asked by the CEO and/or board to weigh in on controversial decisions. They may be tasked with implementing and enforcing unpopular policies or with making tough calls around anything from whether to pursue an acquisition to sizing a reduction in force. They must make budget, investment, and resource allocation recommendations. Their success may hinge on building strong relationships in the C-suite and at the board level.
When hiring the right interim CFO, make sure that your chosen candidate has good judgement. Do they demonstrate an “enterprise” mindset or do they tend to focus on a narrow set of finance-specific issues and deliverables? Can they describe situations where they had to make tough calls without having all the facts or the luxury of time? Do you trust them to represent the company with key stakeholders? How will they function in a crisis?
Regardless of known current and future company priorities, all interim CFOs need to be able to pivot – fast, because, as we all know, change is a constant.
For example, when I joined one private biotech as interim CFO, the initial mandate was to help the company prepare for an IPO contemplated 18-24 months down the road. The board decided to accelerate the IPO timing, and my role moved immediately to full-time as I engaged on myriad workstreams including selecting IPO banks, crafting the company’s messaging, getting on file with the SEC, expanding the finance team and recruiting the permanent CFO.
Similarly, I joined another private biotech to be the consulting CFO with the expectation that the permanent CFO would be hired when the ongoing clinical trial read out and the company was ready to raise money. What was initially envisioned to be a part-time caretaker role quickly evolved into a full-time sprint as the company pivoted to preparing for a cross-over financing and IPO.
Consider FLG Partners for Your Interim CFO Needs
CEOs and boards in need of interim CFO consulting can rest assured that FLG Partners is standing by with talented and experienced candidates who have the right mix of skills, team management expertise and domain familiarity. FLG CFOs also bring a depth of professional, transactional and situational experience, gravitas and good judgement that our clients find invaluable. If you need part-time or full-time interim CFO support, we’re here to help.