Rise of the CFO-for-Hire

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By Eric Romoff on April 18, 2018

Increasingly, companies are outsourcing the role of Chief Financial Officer (CFO), also known as CFOs-for-hire, and interim, or contractual, CFOs. It may seem odd that companies, from large firms down to small- and medium-sized businesses, would contract out an executive position. But understanding the challenges and opportunities this trend presents can help you evaluate potential payoffs for your business. 

Benefits

  • Lower costs. With permanent employees, benefits, opportunities for training and career advancement, and other aspects for retainment should be top-of-mind considerations. Having an outsourced CFO, however, sidesteps some of these factors because the position is either temporary or such logistics are handled by the CFO’s parent company (when there is one). And because you may not boast the payroll to accommodate in-house accounting, small and medium-sized businesses benefit from this exponentially more than their larger counterparts.
  • Minimize off-peak periods. Outsourcing gives greater flexibility to hire a CFO according to a business’s peak season. If a company doesn’t need a full-time CFO during off-peak periods, they’re under no pressure to hire one. Maximize payroll, and profit, by limiting overhead and keeping overall costs low.
  • Flexible commitment. Taking a test drive before finding a full-time financial executive might not be the worst idea. Depending on your particular arrangement with your outsourced CFO, it might be easier to make changes if they’re not living up to expectations. 
  • Trained professionals. By looking outside your own walls, you can rest easier knowing your next CFO comes vetted by a home agency. This puts your financials in the hands of trained pros, leaving you more time to focus on scaling your business.

The perks of contracting an outside CFO can be great, but below are some challenges to prepare for along the way.

Challenges

  • Longer onboarding. Syncing workflows and work styles with that of a CFO-for-hire’s parent entity can take more time than hiring and onboarding an in-house employee. This is especially true when it comes to establishing communication procedures. Both your company and a parent agency or independent CFO will have their own way of working, and acclimating an interim CFO to your set of processes will require an extra dose of patience. 
  • Less control. When working with a CFO for hire, you forgo some leverage that comes with managing a full-time team member. Some motivators for high performance, such as opportunities for long-term career advancement, don’t exist. Often times, the client company won’t exert direct control over the CFO, instead having to coordinate with the home agency to voice concerns.
  • Limited independence. Outsourced CFOs typically don’t make considerable financial decisions on your behalf. While you can still expect to save buckets of time by outsourcing financial leadership, meaty financial decisions will still fall squarely in your lap. Of course, you’d want to be working with someone whose expertise you trust and who is able to push back and provide financial reassurance when needed. 
  • Vulnerability. Increased protection against the mishandling of money is definitely a pro of outsourced CFOs if there’s a quality agency or parent company with skin in the game. But the risk remains that a hired gun may mishandle sensitive financial data. You might get the sweats wondering if an outsourced CFO is engaged in Tom Foolery. 

Conclusion

It’s important to also consider how a nontraditional CFO might fit with your company’s team makeup, structure, and culture. But ultimately, only you will know if an outsourced CFO will positively impact your company’s bottom line. That’s the thing about the for-hire business: testing the waters is a built-in feature. Whether you want to use sporadic financial advice, or put feelers out for a good match that can eventually become in-house, you can shape outsourcing to fit your company’s specific needs. 

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