Why would we hire an external CFO ? Let's analyze its functions first. The chief financial officer or CFO is one of the most important roles and with the most important functions within an organization. Reporting directly to the CEO and collaborating with the COO, he is the person who exercises financial control of the company, watches over the cash, makes economic forecasts and acts as a financial interlocutor with banks, financial analysts, venture capital firms and shareholders. Therefore, its relevance is capital for the good progress of the project and its economic health.
The External Financial Director as a temporary solution
What happens when a company is forced to dispose of its CFO or it is imminent leaving? In these cases the organization has several options. One of the most common is the search for a new in-house manager outside the company or through internal promotion, promoting someone to assume the functions of the financial department. In the event that it is decided to look for candidates outside the home, there will be a period in which the company will be left headless in this sense and the tasks of the financial director will be assumed by the CEO, the COO, the people who have stayed in the finance area or the external agency with which the company usually works.
Another way of looking at it. A long-term outsourced service
However, there is another possibility that is quite interesting (especially when the organization is going through financial difficulties or a crisis situation): resorting to an external financial director . This figure is usually a senior executive with extensive experience in various sectors who performs the tasks of CFO in-house for a certain period, depending on the needs of the company that hires him. Their incorporation is done through an outsourcing contract , not through a temporary contract. In practice, it involves outsourcing the economic-financial affairs of a company.
Reasons for using an external CFO
- Specialization.- These profiles are usually hardened in a thousand battles and have previously worked in complicated situations, such as pre-insolvencies and creditors' contests, reputational crises, bankruptcy, etc. An external CFO is perfectly prepared for these complicated scenarios, unlike other managers who have only worked in that company or the other positions that assume financial responsibilities when the CFO leaves.
- Neutrality.- Being a figure that comes from abroad, they will see everything with greater objectivity than the CEO and other directors of the house. You will be able to make difficult decisions and restructure the areas that are necessary to guarantee the viability of the project and you will not get carried away by emotion or personal interests. Even so, it is also in your power to guarantee the best possible conditions of departure for the personnel you dispense with.
- Involvement.- Hiring an external financial director implies having an executive who will dedicate himself body and soul to the tasks of the position. If you choose to temporarily transfer the functions of the CFO to the CEO or COO, they will only be able to do such jobs part-time or when they take time off from their normal duties.
- Security.- Why put patches when you can hire a technician to fix a fault? Resorting to financial responsibility outsourcing is betting on insurance and reducing uncertainty. The external CFO will know what to do from day one, because he has not done many times. It will require a small margin to soak up the structure and the beads, but its immersion will be quick. The effect will be noticeable in a short time. He will arrive, do what he has to do and leave, making way for a new CFO if the company so chooses and calming the waters in the transition period.
- Flexibility.- The person who exercises this role will adapt to the situation and the needs of the company and not the other way around. In financial outsourcing, closed structures do not fit. Is a merger or acquisition going to take place? A sale? A capital increase? Is it necessary to close a subsidiary or get rid of industrial or intellectual property assets? Thinking of spinning off a business? The outside CFO adjusts accordingly to perform their job.