The role of part-time CFO is more common than ever, and it appears the CFO services industry is poised for a lot more growth. Why? Most start-up, emerging, and medium-sized companies have a need that is uniquely filled by seasoned finance executives who work for multiple companies concurrently. The services are affordable and the value added is both tangible and significant. With this in mind, I wanted to mention the three main mistakes companies make when they consider hiring a part time CFO.

WAITING TOO LONG

The right time to hire a CFO consultant is a function of three variables: complexity, steepness of growth/shrinkage curve, and size. When it comes to complexity, every business reaches a point where no one person, even the founder or CEO, can keep all of the details of the business in their head. This requires the development of systems and infrastructure to empower the leaders and mangers of the company to make the right decisions. A qualified CFO has dealt with much more complexity in their career, and building these reporting and tracking systems and helping management make the right decisions should come as naturally to them as riding a bike.

A small and stable business will often survive without a CFO. The challenge with this premise is that most businesses do not want to remain small and, in our competitive economy, business stability is almost extinct. Rapid growth requires an overwhelming amount of time and resources. When a company I worked for unexpectedly grew from $30 million to almost $50 million in annual sales in just twelve months, we effectively outgrew every process and system designed to organize the business efficiently and profitably. We had to break almost everything and then re-build it to scale. This is also true of companies that are shrinking and downsizing. These companies often hang on to too many systems and too much overhead for too long, which can ultimately bury them. An experienced CFO will be a key resource to help any organization succeed through the volatile cycles of business.

What size should a company be to begin considering adding an outsourced CFO to their team? Any company at or approaching $1 million in annual sales should be thinking about it. In addition, start-up and pre-revenue companies can often significantly benefit from the assistance of a senior-level executive.

If you wait too long to hire a part-time CFO, your costs and frustrations will be greater than adding this critical player to your team at the right time.

LACK OF EXECUTIVE VOICE AND INFLUENCE

Let’s be clear about who should fill the part-time CFO job. This person should have formal education (with graduate education and/or professional certifications preferred), more than a decade of hands-on senior-level executive experience, and have access to tools, resources, and networks that the existing management team does not have. The decision to bring a qualified person on board should be coupled with a commitment to empower that individual to add as much value to the company as possible. They should be included in all major business decisions and they should be sharing thoughts and advice regularly on how to improve the company as a whole.

A monthly meeting with all of the leaders/executives of the company is often one of the best places to accomplish this. The part-time CFO should present the company’s financial statements at this meeting, which always leads to strategic discussions on how to improve the company.

SHORT-TERM RELATIONSHIP ONLY

When a new employee begins their job, research says that their most unproductive time will be during their first three months. Their value contribution increases with each day of on-the-job training and experience. Hiring a part-time CFO is no different. Once they learn the business and build the relationships needed to effect change they become increasingly valuable to the company. Hiring a part-time CFO on a temporary basis will have “flash-in-the-pan” results – it will look impressive and even make some loud noise, but it will most likely not have a long-term impact on the business.  In almost all instances a permanent part-time CFO will create the most sustainable value for the business.

CONCLUSION

Can accounting and finance really add strategic value to the business, or do these functions play solely a role of compliance? With a permanent part-time CFO, many business owners are experiencing a decrease in anxiety and an increase in success.