When Is an Interim CFO the Right Choice?
The finance function sits at the centre of an organisation's decision-making. Preparing the budget, monitoring cash flow, managing relationships with financial institutions, and reporting to investors and the board all fall within its remit. When the finance director's position becomes vacant unexpectedly, or when the organisation enters a period of financial transformation beyond its usual operations within a short space of time, keeping these responsibilities running without interruption becomes critically important.
In such a period organisations have several options. The role can be handed to an internal executive on an acting basis, a permanent search can be launched, or an interim finance director can be appointed for a set period with a defined objective. Each option carries a different value depending on the organisation's circumstances. An internal acting arrangement can add a new burden to an already demanding agenda for the existing team. A permanent search takes time to reach the right candidate. An interim CFO makes it possible to manage the period between these two options with experienced leadership, or to deliver a specific transformation with expertise.
At E&E Interim, within our long-standing collaboration with Valtus Alliance, we respond to the interim management needs of organisations in Turkey. The finance function stands out as one of the areas from which demand for interim management most often arises. In this article we look at how leadership gaps emerge in the finance function, when an interim CFO is the preferred choice and how the assignment is structured together with the organisation.
How Do Leadership Gaps Emerge in the Finance Function?
The best-known cause of a leadership gap is the departure of the current finance director. When the departure is planned, the organisation has time to prepare. Senior finance executives, however, often leave at short notice. Critical processes such as the budget cycle, year-end close or a negotiation with financial institutions may then be left without a leader. Finding a permanent candidate and seeing them start can take several months.
The second cause is extended leave or absence for health reasons. It is known that the incumbent will return, but the finance function continues to need leadership in the meantime. A permanent appointment does not fit such a situation. What the organisation needs is an experienced leader who will run the function soundly until the incumbent's return and then hand the role back.
The third cause is the organisation's pace of growth. In fast-growing organisations, the structure of the finance function can fall behind the scale the organisation has reached. Moving from an accounting-led structure to a finance organisation covering reporting, planning and risk management requires experience of having managed that transition before. The internal team may struggle to deliver this transformation on its own, as the weight of day-to-day work narrows the time available for transformation work.
The fourth cause is an exceptional period in the organisation's life. Cash constraints, debt restructuring, a merger or acquisition, or the arrival of a new investor all require expertise from the finance function beyond the usual. In these periods, even with the finance director in post, an additional experienced finance executive may be needed to lead a specific project.
What these causes share is that the need for leadership in the finance function is either limited in time or tied to a specific objective. The organisation wants to manage a period, complete a transformation or close a gap before establishing a permanent structure. Interim management is a model designed precisely for needs of this kind.
An internal acting arrangement is the first solution that comes to mind for these needs, and in some cases it works well. The executive acting in the role, however, also has to keep up their own responsibilities. Over a long period this double load can strain both the management of the function and the executive's own area. Whether the acting executive will be a candidate for the next permanent appointment can also create differing expectations within the team. A sounder decision therefore emerges when the length and scope of an acting arrangement are weighed alongside the interim management option.
The impact of a leadership gap on the organisation grows in line with its duration. Postponed decisions in the finance function slow purchasing and investment decisions, leave negotiations with financial institutions in limbo and can weaken the reliability of reporting to the board. Within the team, uncertainty about where responsibilities lie leads to an uneven distribution of workload. It is therefore important for the organisation to take a swift and planned decision from the moment the gap is identified.
When Does an Interim CFO Step In?
An interim CFO takes on different roles depending on the organisation's needs. In some assignments the aim is to run the function without interruption until a permanent appointment is made. In others, the executive joins the organisation for a specific transformation or project and completes the assignment once the objective is reached. The situations in which these assignments most often arise are set out below:
• The unexpected departure of the finance director and the period while a permanent search continues
• Extended leave of the incumbent and the time until their return
• Restructuring cash flow and debt restructuring with financial institutions
• Financial due diligence and post-transaction integration in mergers and acquisitions
• Rebuilding reporting and control structures following a private equity investment
• Moving to an enterprise resource planning (ERP) system and renewing finance processes
• Preparing the financial structure ahead of a public offering or a new funding round
Each of these situations calls for a different experience profile.
The strengths of a finance director who will lead a debt restructuring are not the same as those of one who will deliver an ERP transition. The first step in an interim CFO assignment is therefore to clarify which of these headings the organisation's need falls under. Once the need is clear, the candidate profile takes shape around it.
Sector experience, the organisation's scale and its ownership structure are also taken into account when defining the candidate profile. For an interim CFO joining a family business, cultural fit comes to the fore, while for an executive joining the local unit of a multinational group, command of group reporting is key. The Valtus Alliance network makes it possible to reach these different profiles quickly. At the matching stage, the candidate's results in similar assignments and the working relationship they will build with the organisation are considered together.
The core responsibility of an interim CFO appointed while a permanent search continues is continuity. Budget cycles, year-end close, the tax calendar and reporting to the board proceed without disruption. In this role the executive focuses on running the existing structure soundly and handing a well-ordered function to the permanent executive. The observations gathered during the assignment also provide valuable input for the permanent executive in setting priorities.
In transformation-focused assignments the expectation is different. An interim CFO appointed to restructure cash flow, reach a new agreement with financial institutions or build the reporting infrastructure is expected to deliver measurable results within a set period. In such roles, the executive's experience of having led a similar transformation shortens the learning curve and allows the organisation to see results from the first weeks.
Projects such as ERP transitions and preparation for a public offering also make up a significant share of transformation-focused assignments. Moving to a new system requires finance processes to be redefined, data migration to be planned and the team to adapt to new ways of working. In preparation for a public offering, bringing financial statements in line with regulatory expectations, strengthening the internal control system and designing investor communication come to the fore. An interim CFO who has delivered such projects before makes the organisation's preparation more predictable.
In organisations backed by private equity funds the interim CFO also plays an important role. After the investment, the fund expects more frequent and more detailed reporting from the organisation. Strengthening control mechanisms, aligning cash management with the investment plan and tracking the value creation plan through financial indicators are the main items on the agenda in this period. An interim CFO who builds this structure leaves the organisation's own team with a sustainable finance organisation at the end of the assignment.
Mergers and acquisitions call for similar expertise. Financial due diligence before the transaction, the negotiations during it and bringing two different finance structures together afterwards require an intensive, time-bound way of working. While the organisation's permanent finance team carries the load of day-to-day work, an interim CFO can lead this process with focus. Once integration is complete, how the new structure will work is passed on to the organisation's own team.
The international experience offered by the Valtus Alliance network carries particular value in cross-border transactions and multinational structures. An interim CFO familiar with reporting standards in different countries, the expectations of financial institutions and the dynamics of investor relations helps organisations in Turkey manage their international processes more quickly and predictably.
How Is the Assignment Structured with the Organisation?
The success of an interim CFO assignment depends largely on how the role is defined at the outset. The scope of the executive's decision-making authority, the reporting line, the length of the assignment and the expected outputs are set out in writing. In the finance function this definition matters all the more, since signing authorities, banking relationships and reporting to the board depend directly on it. We covered in detail how the mandate is clarified in our article How Is the Mandate Clarified in Interim Management?.
On starting the assignment, the interim CFO establishes the current state of the function. Financial statements, cash flow projections, loan agreements, the tax calendar and ongoing audit processes are reviewed in the first weeks. One-to-one meetings with the finance team provide access to information not found in written documents. This review shows the extent to which the objectives set out in the mandate match reality on the ground and forms the basis of the action plan.
Relationships with external stakeholders are also an important part of this first period. Banks, independent auditors, tax advisers and investors are directly affected by a change of leadership in the finance function. The interim CFO meeting these stakeholders early on, and the length and scope of the assignment being explained clearly, helps relationships continue with confidence. Where the organisation has an audit committee, the arrangements for communicating with it are also treated as part of the mandate.
The relationship with the finance team is one of the factors that shape the course of the assignment. The interim CFO's position takes shape around the results to be delivered during the assignment. This can make it easier for team members to approach the executive with a more open attitude. The executive valuing the team's knowledge and involving them in decisions helps build cooperation quickly.
The division of roles within the finance team is also clarified at the start of the assignment. How key positions such as the chief accountant, the financial controller and the treasury manager will work with the interim CFO, which decisions will be taken at team level and which will be submitted for the executive's approval are all agreed. This clarity allows team members to act with confidence within their own areas of responsibility. Knowledge transfer at the end of the assignment is built on this division of roles too, since the people who will sustain the structure the executive leaves behind are the members of this team.
Throughout the assignment a regular review rhythm is maintained with the organisation. The board or the chief executive tracks progress against the agreed objectives through monthly meetings. These meetings cover not only financial indicators but also the stages of the transformation project, emerging risks and the priorities for the next period. We shared how an interim manager's performance is monitored in our article How Is an Interim Manager's Performance Monitored During the Assignment?.
As the end of the assignment approaches, preparation for the handover begins. One of the interim CFO's most important contributions is leaving the structures, processes and knowledge built during the assignment permanently with the organisation. If a permanent executive has been appointed, the handover takes place through a transition period in which both executives work together. If no permanent appointment has been made, knowledge transfer is directed towards key members of the finance team. In both cases the aim is for the function to continue working in the same way after the interim assignment ends.
The speed with which an interim CFO can join the organisation is another strength of the model. In a permanent search, candidates' notice periods, interview schedules and decision processes can take several months. Interim executives, on the other hand, are ready for their next assignment and can join the organisation shortly after the mandate is clarified. This speed provides a decisive advantage, particularly in periods when leaving a critical financial process without a leader poses a risk.
The cost side also weighs significantly in organisations' assessments. The cost of an interim CFO assignment is calculated on the basis of the time the executive will spend with the organisation and the scope of the role. When this cost is considered alongside the cost a wrong permanent appointment or a critical period without leadership could impose on the organisation, a more meaningful comparison emerges. The decision is taken on the basis of the risks and opportunities of the period ahead.
Beyond closing a gap in the finance function, an interim CFO offers the organisation the means to manage a specific period with experience. When a well-defined mandate is matched with the right experience profile, the organisation both protects continuity and delivers the transformation ahead of it in a planned way.
As E&E Interim, drawing on our role as Valtus Turkey partner and the experience we have built since 1992, we meet organisations' interim management needs in Turkey to global standards with local expertise, putting the right leadership in place at the right time. To discuss an interim leadership need in your finance function, you can contact us.
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