Interim CFO

What Are Interim CFOs?

Interim CFOs, short for Interim Chief Financial Officers, are experienced finance professionals who are temporarily assigned to companies to lead the finance function and make strategic and operational decisions. In this role, they help ensure a company’s financial health and achieve its growth goals.

Unlike in-house CFOs, interim CFOs can be integrated into a company quickly and efficiently and take immediate, effective action. This allows organizations to respond to current challenges and opportunities without having to go through the lengthy process of hiring permanent CFOs.

What responsibilities do external CFOs take on?

As temporary leaders of the finance department, interim CFOs take on a wide range of responsibilities, the scope of which may vary depending on the company. Their typical duties include, among other things:

• Financial Management: Interim CFOs coordinate the finance department and ensure that all processes run efficiently and in compliance with the law.

• Financial Strategy Development: As financial experts, interim CFOs develop strategies aligned with the company’s long-term goals. This requires a thorough analysis of the organization’s current state and the identification of opportunities for growth.

• Liquidity Management: External CFOs are responsible for ensuring that a company always has sufficient liquid funds to meet all of its obligations. They monitor cash flow and optimize the capital structure so that financial bottlenecks can be addressed early on.

• Risk Management: Interim CFOs identify potential risks, such as compliance violations or currency devaluations. They assess these risks and develop strategies to minimize them. Optimizing internal control mechanisms may also fall within their area of responsibility.

• Financial Reporting: To provide a transparent overview of a company’s financial situation, external CFOs regularly prepare financial reports. These reports serve as the basis for management decisions and for communication with investors and other stakeholders.

What are the responsibilities of interim CFOs?

The job requirements for temporary CFOs are similar to those for permanently employed CFOs. Accordingly, interim CFOs must meet high standards.

Among other things, they should have the following skills:

• Extensive expertise: Whether in budgeting, controlling, or liquidity management—interim CFOs should have many years of professional experience in financial management and possess extensive knowledge in this field.  

• Understanding of IT systems: Interim CFOs should be well-versed in the digital technologies used for financial management. These include, for example, tools for enterprise resource planning (ERP), financial planning, and accounts receivable management.  

• Strategic skills: Interim CFOs should have the ability not only to develop and implement financial strategy, but also to align it with overarching corporate goals.

• Communication skills: Interim CFOs must be able to communicate effectively with various stakeholders, such as employees, investors, and management.

• Leadership skills: Interim CFOs must have a good understanding of human nature, be assertive, and be skilled in managing people.  

• Analytical skills: To evaluate the company's financial performance and make informed strategic decisions, interim CFOs must be able to analyze data and identify trends.

• Understanding of financial processes: Interim CFOs must also have a good understanding of financial processes and know how to develop and optimize them.

5 Reasons Why Hiring Interim CFOs Is Worth It

The decision to hire interim CFOs can be a wise investment. There are numerous advantages to hiring temporary CFOs:

• Flexibility and adaptability: Interim CFOs can quickly adapt to new situations and adjust the financial strategy accordingly. In addition, they are more flexible in terms of their availability than in-house CFOs and are often available to companies on short notice.

• Experience and Expertise: Interim CFOs have extensive experience across various companies and industries. Thanks to their broad professional background, interim CFOs often possess even more expertise than in-house CFOs. Their wealth of experience enables external CFOs to bring proven strategies and procedures to the table in order to sustainably optimize the company’s financial performance.

• Cost-effectiveness: Compared to full-time CFOs, interim CFOs are often more cost-effective because they are hired only for a specific period and are paid exclusively for the work they actually perform. This reduces payroll costs and enables companies to realize significant savings. Because they have only a limited timeframe to resolve issues and optimize business performance, interim CFOs also tend to act very quickly and effectively. This, too, has a positive impact on costs.

• High ROI thanks to extensive experience: Interim CFOs bring a wide range of experience gained in various companies and situations. This enables them to take swift and effective action to improve financial performance, resulting in a high return on investment (ROI).

• An objective, outside perspective: As external executives, interim CFOs are independent and can provide unbiased recommendations and drive change. They are not directly involved in internal dynamics and can therefore offer a more objective perspective than permanent employees.

Situations in which interim CFOs are in high demand

Interim CFOs are particularly called upon in situations where organizations are undergoing major changes, such as growth, restructuring, mergers, or acquisitions. For example, rapid company growth may necessitate a change in the business model. In such cases, external CFOs ensure that financial processes are adapted to the changes and continue to run smoothly even during the transition. At the same time, they keep a close eye on the company’s financial stability. Transformations are often accompanied by system changes in the finance department, which interim CFOs can also manage.

Preparing for an initial public offering is another possible scenario in which interim CFOs can lead a change process. In this context, they can manage the financial documentation and ensure that all regulatory requirements are met.

External CFOs are also in demand during crises. When companies face financial crises, they create transparency, identify the causes, and implement measures to restore liquidity. If, for example, this requires a turnaround process—that is, a complete turnaround to stabilize the company in the long term—they take charge of the planning and management.

In addition to financial challenges, leadership issues can make the use of interim CFOs necessary. When inadequate leadership skills among the finance department’s management lead to demotivation and a decline in performance, external CFOs can use their expertise to restore stability to the team. They take a similar approach when there are vacancies in finance departments: If a manager is unavailable, interim CFOs temporarily take over leadership of the team and ensure that the department remains productive until the position is filled.

What is the difference between interim CFOs and fractional CFOs?

The terms “interim CFO” and “fractional CFO” are often used interchangeably. Both roles involve external CFOs who bring a wealth of financial experience, can be deployed on short notice and with flexibility, and possess leadership expertise. Nevertheless, there are some differences.

Fractional CFOs—often referred to as CFOs on Demand, part-time CFOs, or part-time chief financial officers—work part-time as chief financial officers for companies. Depending on the client’s needs, fractional CFOs are often hired on a long-term, part-time basis. Fractional CFOs typically work at small and medium-sized businesses, such as startups, that lack the resources to hire full-time CFOs. For these companies, hiring part-time CFOs is usually the only way to gain access to qualified financial and leadership expertise without incurring high costs. The scope of a fractional CFO’s responsibilities often covers a wide range of financial tasks. In many cases, they also take on operational duties.

Interim CFOs typically work for a company for a shorter period of time and handle a narrower range of responsibilities than fractional CFOs. In addition, they are often hired by larger companies with more than 100 employees, where they work full-time. Their assignments usually last six to nine months, though in some cases they are hired for longer periods.

That's why the demand for interim CFOs is growing

For a long time, interim CFOs were a niche profession. However, demand has since risen dramatically, and more and more companies are turning to interim CFOs for support.  

This is primarily due to advancing digitalization and constantly changing compliance regulations. Not every finance executive can meet the resulting increased demands. Added to this is the shortage of skilled workers, which makes it difficult for companies to find qualified finance experts for permanent positions, leading to a rise in vacancies for leadership roles in the finance sector. The search for CFOs who meet the position’s high technical standards and possess the appropriate soft skills can take companies more than half a year. However, since such a critical position in a company often cannot remain vacant for that long, companies are increasingly turning to external CFOs to fill the gap.

Another factor driving the increased demand for interim CFOs is acquisitions by private-equity firms. For example, when private-equity firms acquire family-owned businesses, it is often the case that no suitable successors can be found. At the same time, however, these businesses are expected to become more profitable and efficient. Interim CFOs offer an adequate replacement who can step in on short notice.

How do I find qualified interim CFOs?

The search for qualified interim CFOs requires careful planning and research. There are several options for finding the right candidate:

• Specialized recruitment agencies: There are recruitment agencies that specialize in placing interim professionals. They have a broad network of professionals and can help in the search for the right interim CFOs.

• Online platforms and networks: There are also online platforms and networks that provide profiles and reviews of professionals. This allows users to directly compare different interim CFOs, which simplifies the selection process.

• References and Recommendations: It is advisable to consider references and recommendations from previous clients or business partners. This can provide practical insights into the skills and experience of individual interim CFOs.

• Finance as a Service Providers: Consulting firms that offer comprehensive financial services typically also provide interim management services. They often offer companies expertise and flexibility that go far beyond what freelance interim CFOs can provide. Thanks to their extensive networks, Finance as a Service providers can also quickly access suitable professionals, making them an efficient option for finding qualified interim CFOs.

Career Path to Becoming an External CFO

The path to becoming an external CFO typically begins with completing a degree in business administration. Concurrently or afterward, candidates gain practical experience in the finance sector. Aspiring interim CFOs often start in operational roles, such as accountant or controller. Subsequently, several years of experience in a managerial position or on the executive board is required. During this time, they not only develop their leadership skills but also acquire specialized knowledge in various areas that may fall within their scope of responsibility as future interim CFOs.

How much do interim CFOs earn?

The daily rate for interim CFOs starts at 1,000 euros, but there is considerable room for variation on the upper end. While most daily rates range between 1,000 and 3,000 euros, they can be higher in large corporations. Some interim CFOs thus earn a gross annual salary of up to 1,000,000 euros. However, according to the job search engine Glassdoor, the average gross annual salary for interim CFOs in Germany is 135,000 euros.

A standard starting point for salary negotiations between interim CFOs and their clients is the so-called “one-percent rule.” According to this rule, the salary of interim CFOs is approximately one percent of the annual gross salary of equally qualified in-house CFOs. If, for example, these in-house CFOs earned 125,000 euros per year, the daily rate would be 1,250 euros. For a 150-day assignment, that would amount to 187,500 euros.

The size and sector of the company where interim CFOs work also play an important role in determining their compensation. In addition, the qualifications and professional experience of interim CFOs are relevant.