Talent Strategies for Modern Business: Leveraging the Interim Executive Model – Part 6

Talent Strategies for Modern Business

Leveraging the Interim Executive Model

We never know from one day to the next when contacted by clients what their situation will be and which combination of resources and expertise they will need. Though many businesses share a number of underlying principles about how they run and how they are successful, each company is unique. They differ in any number of ways: where they are in their lifecycles, how they were founded and by whom, what has spurred growth, the leadership team, the culture, the challenges, and what type of expertise is needed at this point. 

At Cerius, we have been working with companies for more than a decade to find the right interim executive at the right time to help organizations fill their exact needs.

Organizations can leverage the expertise of an interim executive to get what they need in flexible, affordable ways. To offer just a few ideas, the following four chapters offer rare views inside a number of companies and show how they leveraged interim executives to bring them success through part-time and interim placements in small, midsized, and Fortune 100 situations. 

Part-Time CFO: A Small Construction Firm Grows Up

One of the most common needs we help organizations address is in the area of finance. Interim and part-time finance executives are the most requested roles in the interim executive space. Finance and accounting functions are critical to an organization; this is the one area where you cannot “fake it until you make it.” A malfunctioning or mismanaged finance and accounting department can cripple any organization. Because of this, we will take a few pages to discuss the impact this role has on an organization. 

Companies with revenues less than $10 million can seldom justify a full-time chief financial officer. This doesn’t mean they don’t have growth goals or issues requiring the attention of a senior financial executive; they simply don’t need top-level talent in-house every day. That is precisely why more companies are engaging part-time CFOs.

Engaging an interim or part-time CFO can help companies immediately focus on critical impact elements, rather than allowing a key resource to get lost in day-to-day operational details. Part-time CFOs are cost-effective and offer an outside perspective that delivers invaluable input and insight into strategic decisions. If you’re considering a part-time CFO, here are five things you can expect.

  • Interim CFOs will want to know what’s bothering the business owner most. To help a company get on track, a part-time CFO needs to be aware of the most pressing issues the company is facing financially. He or she will want you to do most of the talking and will start by asking basic questions about your financial situation. Your financial statements will tell the part-time CFO the what, but not the why. That is important to understand as well.
  • The interim CFO will also want to get acclimated to the business environment and establish a trust factor as a foundation for the relationship with the owner. Although break-even points are central to business plans, for example, not many company owners pay granular attention to them. They may not understand the formulas to calculate at what point they have enough sales to cover expenses, after which sales become profitable, or how frequently this should be tracked (annually, quarterly, monthly?). If a company is not operating at break-even, every day that goes by, it is losing money. This will be one of the first places an interim CFO will want to target, calculating break-even on a weekly basis, and looking at the P&L statement for line items that are misclassified. The interim CFO will discuss scenarios for funding growth initiatives and evaluate the risk factors for each. Understanding expenses in terms of sales helps organizations comprehend decisions and financial impacts before executing.
  • Another thing that part-time CFOs examine is the difference in the number of days of sales in accounts receivable and accounts payable. The larger the gap, the tighter the cash flow. If a business is collecting receivables in 70 days and paying vendors in 30, that’s a wide gap. The part-time CFO will take action by encouraging the company to follow up on and bring down receivable accounts to 45 days while stretching vendor payments to perhaps 40+ days.
  • Understanding the implications of profit margins is grossly underestimated in many organizations, and only an experienced “financial person” can calculate and help understand the significance of the numbers. For a simplified example, assume $10 million in annual sales and a target to improve the margin by 1 percent: That seemingly minuscule margin improvement can add $100,000 to the bottom line.
  • A review of the financials, potential opportunities for impact, and discussions with the company’s tax professional may seem boring but can bring a significant ROI to the company. For example, we had a part-time CFO identify a tax savings opportunity that had been previously overlooked by both the Controller and the CPA. 

The ROI on that assignment was as follows:

  • Part-time CFO cost: $30,000
  • Tax savings: $600,000

A part-time CFO manages profits and margins and educates the rest of the leadership team on what the organization’s numbers mean. The surplus amount can then either be used for business needs or invested elsewhere.

You’d be surprised how part-time a CFO can be, yet still, deliver. We once worked with a small company in the construction industry; the CEO, Scott, had ongoing frustrations about not having the information he needed to make decisions. He continually noticed inconsistencies in financial reports. He also had issues in one of the most critical areas—job costing. The company either lost jobs because their pricing wasn’t competitive or, even worse, won jobs, but then lost money on the job because the initial price estimate was less than the cost due to misquoting by subcontractors. 

Within a company the size of his, it didn’t make sense to hire a full-time CFO, but Scott still needed the help. His accounting and operations team had grown up with the company and also needed more experienced guidance.

We found a part-time CFO, Patrick, who had worked with these types of issues before. The team quickly gained confidence in him. Scott now had an advisor he could confide in. In fewer than forty hours in total, Patrick was able to give the existing team enough direction to fix a number of issues, provide accurate reporting, deliver a budget, advise on multiple financial situations, and start the company’s first-ever strategic planning process.

Lesson Learned

When it comes to interim executives who have worked in a number of companies and have faced various, diverse, challenging situations, a lot of experience can go a long way. Where it may be difficult to imagine not having executive leadership sitting in your office five days a week, many situations simply don’t require that level of physical presence, and the dollars may not justify it. But you can still reap the benefits of top-tier talent and end up with the same (or better) results.

Learn how we can help your business grow profitably today.