Hire the Top 3% of Interim CFOs

Demand for Interim CFOs Soars As Companies Seek Financial Leadership

For many companies, there comes a time when in-house talent lacks the financial expertise to successfully navigate the initiatives and challenges at hand. Even when a company needs this financial leadership, hiring a full-time, permanent CFO may not be a cost-effective solution, or the timing for this type of long-term commitment might not be right. In such cases, interim CFOs may be the best solution for companies that need extensive experience at potentially lower costs.

Indeed, demand for interim CFOs is rising. According to the Russell Reynolds Global CFO Turnover Index, the number of finance leaders leaving the C-suite spiked in the first quarter of 2024, with the tech sector recording the highest CFO turnover since 2022. Amid a talent shortage, challenging market conditions, economic uncertainty, and expectations of increased M&A activity, more business owners are seeking to hire professionals with strong finance skills on a temporary basis.

As with any senior-level hire, finding the right person is critical. The interim CFO must be ready to hit the ground running and capable of fulfilling the vision of the CEO and the company’s investors. It’s essential to hire a senior-level financial expert who has the ability to quickly assess the company’s situation, build key relationships, and effect change.

But hiring an interim CFO can be challenging—particularly since the circumstances that created the need for the hire often mean that time is of the essence. This hiring guide shows you how to identify qualified candidates for this crucial role and create the best environment for a successful interim CFO engagement.

What Attributes Distinguish Quality Interim CFOs From Others?

Candidates will possess a mix of skills, but the professional and leadership qualities required to be a successful interim CFO are consistent for all roles. A superior interim CFO should have these skills:

Facility in prioritizing – World-class interim CFOs are not just proactive in assessing a company’s situation and zeroing in on the right plan, but are also able to clearly explain their rationale for the prioritization. For example, when time is critical, or there are not enough resources to tackle every issue, the interim CFO should focus on those aspects that are immediately pertinent to the company, while highlighting outstanding areas that need to be addressed by the permanent CFO in the future.

Ease in working at many levels – Top interim CFOs are willing and able to roll up their sleeves to get the job done. At the same time, they must be able to guide and mentor both senior and junior employees so that their work will add value beyond their tenure. These interim CFOs are also capable of adding value across all operational aspects of your company. Beyond financial operations, they can often provide an objective perspective on topics such as marketing budgets, logistic operations, supplier contracts, and staffing plans.

Knowledge of the latest technology – Any strong candidate is likely to be familiar with many different types of software and can provide opinions not only on accounting systems, but also on business intelligence tools and team communication apps.

Ability to build relationships – A first-rate interim CFO’s expertise serves them well when coming into a new organization, where quickly building up good working relationships with key stakeholders is a must. They should also be able to offer recommendations and introductions to legal firms, audit firms, bankers, lenders, insurance brokers, outsourced HR providers, recruiters, and other industry experts.

How Can You Identify the Ideal Interim CFO for You?

To identify the right interim CFO for your business needs, it’s helpful to first have a firm grasp of your company’s objectives for making this hire. Here are common reasons for retaining an interim CFO, with case studies that illustrate how their financial leadership and strategic guidance can help.

Managing Periods of Transition

Interim CFOs are often brought in to handle corporate transitional phases such as a change in company ownership, which may prompt a change in senior management. They may also be hired to advise on a company acquisition, which requires additional financial expertise to ensure a smooth integration. Sometimes, the transition at hand may be caused by the sudden departure of the current CFO, creating an immediate leadership gap.

Case Study: Outdoor Leisure, an outdoor furniture manufacturing company, needs help integrating a recent acquisition of Lollypop Fabrics into its business. Lollypop has been running its business on a cash basis using a simple accounting software platform, whereas Outdoor Leisure’s business is run on an accrual basis using a sophisticated, closed-loop ERP system. Lollypop will continue to operate out of its current headquarters, but its people and systems need to be integrated into Outdoor Leisure’s business by year-end. Who would be the ideal interim CFO for this situation?

In this instance, Outdoor Leisure should be looking for an interim CFO with:

• A strong technical accounting background with prior experience integrating small acquisitions into larger organizations.
• Familiarity with both accounting software systems.
• An understanding of the tax and accounting implications of the transaction in order to form their own opinion as well as effectively leverage outside accounting advisors.
• The ability to clearly communicate with Lollypop team members to incorporate policies and procedures to effectively work together going forward.
• A CPA designation, ideally with a career presence at one of the Big Four or an equivalent accounting firm.

Preparing for Significant Business Events

Interim CFOs can help business owners strategically position themselves for important events such as a fundraising round or an exit. These complex situations require a senior-level financial professional to help navigate the process as well as to make sure that the company’s financial statements and business operations meet the due diligence and compliance requirements of the investor or acquirer.

Case Study: CatToys.com has experienced rapid growth and its co-founders would like to explore strategic alternatives such as a sale to a strategic buyer or receiving a capital investment from investors. The business has used a diligent bookkeeper to date, but given the attention to growth, the co-founders have not had much time to focus on the company’s financial reporting. However, they know that in order to get the best valuation, they need to clean up their financial and business operations and are looking for an interim CFO to do just that.

In this instance, an interim CFO can help prepare the company for the sale or investment as well as assist with its pitch to investors and strategic acquirers. The interim CFO will need to:

• Understand diligence requirements of all parties involved.
• Ensure that all documentation is in good shape (corporate documents, historical financials, etc.) well before they are presented to outside parties.
• Build a financial model and support valuation discussions.

The above tasks require familiarity with this industry’s particular competitive landscape and dynamics. The right candidate will likely have a finance background and experience working on Wall Street or in corporate development.

Supporting Growth

Interim CFOs are also beneficial to startups or established companies experiencing phases of rapid growth. These companies need senior-level financial guidance, but may not be able to afford a full-time executive. In these cases, the finance professional may be referred to as a part-time CFO or a fractional CFO since the company is receiving expert guidance at a fraction of the price of a chief financial officer hired on a full-time basis.

Case Study: Star Pajamas is a young company that saw early success after a celebrity was sighted wearing its signature pajama set at Starbucks. Online sales surged, which has created out-of-stocks on some of its most popular items. The founder would like to ride this momentum to expand her product line but is unsure how much she can really afford to invest in manufacturing next season’s line. She has been approached by lenders willing to provide her a line of credit against the inventory, but their rates seem high. She is looking for an interim CFO to help her weigh different options.

In this case, an interim, part-time CFO can help Star Pajamas assess its current financial situation, better understand and hopefully improve its cash flow cycle, and ascertain the potential risks and rewards of different levels of investment in inventory production. They should also be able to:

• Recommend trusted banks and lenders.
• Evaluate the cost of financing the inventory versus using cash on hand.
• Implement new systems and appropriate levels of process to ensure the founder has access to up-to-date and accurate financial information.
• Train the existing finance department or recruit mid-level financial talent to ensure these implementations are carried forward.

This interim CFO will have experience working with high-growth companies and is an excellent jack-of-all-trades. Ironically, in these situations, an excellent interim CFO may actually perform themselves out of a job by putting in place systems that enable less experienced finance teams to run successfully.

Improving Operations

Interim CFOs are often hired when companies simply need more firepower to provide business analysis and improve core operations. Interim CFOs can provide fresh perspectives as well as the expertise to upgrade systems and accounting and reporting processes. Experienced interim CFOs are also adept at professionalizing finance and accounting teams, through both recruiting new hires and mentoring the internal team.

Case Study: After a major acquisition that distracted the senior leadership team and a loss of its CFO to illness, Brooklyn Vitamins’s operating profits have significantly declined. It has also breached a covenant on its critical bank facility, and its auditors have voiced concerns over internal controls. After investigating its prior quarterly expenses, it determined that too many employees are engaging outside vendors and spending has grown out of control. In addition to addressing these issues, the interim CFO is needed to help the management team recruit an appropriate CFO in a full-time role.

In order to turn around this precarious situation, the interim CFO needs to take a number of swift, decisive actions despite their temporary capacity. These may include:

• Implementing controls to limit purchasing approval to department heads.
• Implementing a new vendor approval process.
• Developing comprehensive reporting and budgeting tools to improve management reporting.
• Improving integrated closing processes to provide timely results.
• Negotiating with lenders to ensure that the company’s line of credit can remain in place.
• Using their knowledge of the company’s needs to find and ensure a smooth transition to the new CFO.

This interim CFO is a strong problem-solver with experience tackling other corporate challenges. Their expertise will set the company up for future success with a permanent CFO.

While the examples above chart a number of different ways in which an interim CFO can prove to be useful, companies in a transition or in high-growth mode may know they need financial help, but not exactly what type. The individuals in these roles may carry the same title, but their expertise and experiences can vary widely. In these cases, identify the most important thing an interim CFO needs to address at your company. Look for someone who has handled a similar situation in the past. Determine if you need specific qualities, such as technological skills, strategic finance expertise, deep knowledge of operations, or other specialized skills. And evaluate how applicable the candidate’s experience is to your industry or your company’s life-cycle stage.

What Are the Most Important Interim CFO Interview Questions?

The interview is a key factor in the hiring process. As you shortlist candidates, here are a number of questions to add to your interview arsenal:

What is your prior experience in interim or consulting roles?

The answer to this question gives you the chance to assess if the candidate’s previous roles were at a company at the same stage and structure as yours (e.g., a startup or a private equity-backed company). Interim assignments are not the time to train employees. If a candidate can’t check all the boxes, that doesn’t necessarily mean they can’t handle the job; however, they should be able to clearly articulate why their prior experience will allow them to quickly succeed in this role.

How do you prioritize responsibilities when there is not enough time in the day?

This question highlights the candidate’s ability to juggle multiple tasks and optimize team dynamics. They should be able to convince you that not only can they get the important tasks done and stay calm in a stressful situation, but they can keep their teams calm as well.

Who are your favorite people to work with, especially in the area you are looking to help?

A strong interim CFO will be able to offer a number of professional recommendations for external service providers or even full-time employees. An inability to do so may suggest that they haven’t nurtured these types of relationships in the past.

How would you position our company for a successful event like a capital raise?

If you require strategic finance expertise, use this question to learn about the candidate’s track record of success. Ask them about their achievements with capital raising or negotiating successful exits, and how they’d position your company for similar events. Scratching the surface is not enough. Instead, you should delve into the process they’d propose implementing at your company to ensure that they’re willing and able to not only handle the discussions, but also the tedious accounting and legal work required to fully prepare for an exit.

Can you share examples of process improvements that you implemented at previous companies?

If you are specifically seeking operational expertise, this question gives you insight into the candidate’s past achievements. Look for descriptions of key process improvements that saved time and money at prior companies without requiring a major investment. Examples include steps they implemented to improve the cash conversion cycle, or processes they put in place to shorten the monthly accounting close.

Would you be willing to speak to our tax or audit firm?

If you are looking for technical skills, you might consider adding this step to your interview process. Your tax or audit partners will understand exactly which questions to ask the candidate to ensure they have the appropriate expertise for your organization. Your tax advisor can put the candidate through their paces on GAAP reporting requirements, SOX compliance, or implementing internal controls.

Ensuring a Successful Engagement

Once you have found the ideal candidate, spending the time to adequately onboard them greatly enhances the chances of a positive experience and a successful engagement. An interim CFO is a particular position that must be given the room to make decisions while preparing the role for a permanent hire in the future.

Here are a few suggestions to enable a seamless transition:

Clarify the scope of engagement to everyone – New people in an organization, especially finance professionals, can be unsettling. Nervous employees may start wondering if a round of cost-cutting is nigh or if their jobs are at risk in a company sale—which can be detrimental to company culture. To whatever degree you can provide transparency, let your broader team know why the interim CFO is getting involved in the company. This not only creates a better environment for the CFO, it helps limit distractions.

Ensure the interim CFO has adequate resources – As with any new senior-level hire, the onboarding process should involve meetings with key employees to gain a broader overview of the company and become familiar with decision-makers. In addition, the interim CFO will need access to financial systems and corporate documentation, and will potentially need introductions to and meetings with key advisors such as your investors, bankers, and audit firm.

Determine milestones jointly – Many experienced interim CFOs will provide you a roadmap for the first few weeks of the assignment. If not, don’t be afraid to ask for one. While time and circumstances may alter the original path you and the interim CFO decided on, a good game plan will ensure that you start with similar expectations about deliverables, expected results, and timing.

Why Do Companies Hire Interim CFOs?

Given the limited time an interim CFO may spend with your organization, it’s easy to underestimate their importance. However, the CFO role is a critical position in the company. Finding a superior interim CFO may increase your runway, get you closer to an exit, and lay the groundwork for the right full-time CFO hire in the future. The best interim leader will leave a positive impact on your company long after they’ve moved on.