Charlene Andersen

"Renting" a CFO? Three tips for making the right choice

By Charlene Andersen

Business owners considering a interim CFO should think about culture, characteristics and collaboration.

Small-business owners wear many hats. One is that of Chief Financial Officer (CFO).

As the business grows, the CFO role ultimately shifts from the owner/CEO to another member of the management team.

Before that happens during the time when a CFO is needed, but the business can't sustain another C-level position businesses often experience a "CFO gap."

Two executives holding tabletsWhat are some of the indicators of a CFO gap?

Typically the gap occurs when the business is in a stage of rapid growth, exploring a potential acquisition, or needing significant financial-decision-making management. The owner/CEO is having greater difficulty keeping a keen eye on the short- and long-term numbers while his or her attention is absorbed by strategic development, customer acquisition, and operations.

Another indicator is when business modeling has become a must-do.

If a full-time CFO isn't realistic, companies sometimes retain a business accounting firm or a CFO consultant (rent-a-CFO).

When exploring these options, business leaders should take three steps to ensure their decision is the right one:

  1. Assess your business's culture and growth direction. You'll want to find someone who fits its culture and understands its direction.
  2. Identify some key characteristics or skills you want the person to possess. You'll want someone with the skills to go beyond managing the cash and profit-and-loss. You want them to help you dig deep to evaluate various business models and run cost-benefit analysis and forecasts. They should ask tough questions and identify the key performance indicators that guide long-term decisions. They should be a resource that helps guide and direct you through your next funding cycle.
  3. Confirm that the individual can work collaboratively with your current financial staff, accountant, your board and you.

A rent-a-CFO is a critical member of the team during the growth stage of your business. When seeking such an individual, speak with your accountant and reach out to your network for referrals.

Develop a scope of work and discuss it with each individual you interview. To determine some of the specifics, solicit the input of your lenders and/or investors on what they think could be improved or altered to help with the financial managment. Take the time you need to make sure the person you choose is right for this critical role.

Charlene Andersen is the Manager of Business Education for the Community Loan Fund's Business Finance team.