Confessions of an Interim CFO: The Five Things to Tackle First

When you join a company as interim CFO, you are expected to bring value from the very first week. 

This is daunting. It often takes a couple of months – and longer for larger companies with many subsidiaries and multiple verticals – to fully understand a business in sufficient detail. Also it takes a few weeks to learn how good the team in place is.

Frankly, analysis in the number one area (which is cash!) will lead you to all other areas of importance

What to do so you can actually bring value in a manner where you have confidence under such a tight time-frame?

A 100-day plan

In an ideal world, you will form a 100-day plan. If time is on your side, take at least a month to create such a plan.

However, if you are being brought in as interim CFO, chances are the company may not have 100 days' cash left. Or you may be hired to fix some specific issue or run a specific project, be it budgeting, a transaction, or integration after a transaction.

Whatever the case, I focus on five immediate areas. I am tempted to put down “cash” for all five. Frankly, analysis in the number one area (which is cash!) will lead you to all other areas of importance.

Follow the cash

From your first day. If there’s no cash forecast, start creating one – right now. The exercise will quickly lead you to understand the levers of the business.

As you try and forecast cash, you will learn of discrepancies between revenue recognition versus actual cash collection, which will start with you understanding the balance-sheet debtors and bad debts.

You will learn about COGS [cost of goods sold] figures versus what remains in inventory. This will lead you to understand whether cash is going out on potentially unnecessary inventory build-up.

Trial balance full review

Understand your balance sheet quickly. Conduct a detailed trial balance review straight away with the current team. Whoever is in charge of accounting ought to be able to explain every line of the balance sheet and show you reconciliations.

If they are unable to do that to your satisfaction, start investigating and form a reconciliation project plan. The current team is obviously not on top of things.

If your balance sheet is correct, you would be on a solid footing for understanding the business. Focus on the areas of risk in the balance sheet.  

You may have assets which turn out to be not real. They may not be depreciated properly. The debtors may be incorrect. There may be obsolete inventory or inventory that should already be in COGS. And there may be liabilities which you cannot service (loans or creditors).

Controls and compliance

Review the business controls so that you can be confident that the business risks are minimized.

The best way to do this is to leverage on your cash forecast work, focusing on the larger areas. By that, I mean checking that your sales-to-cash cycle does not have any risks/leakages.

Check that the payables function is not paying fake suppliers, overpaying, or paying for goods not received. And don’t forget that a key part of compliance is checking any loan covenants straight away. 

Key products and major costs

Figure out your highest-margin products. Using Pareto’s 80:20 rule (about 80% of the effects can be attributed to 20% of the causes), a CFO needs to quickly see where to focus their energies.

Typically, 20% of the product range will supply 80% of the profit. Some basic analysis will lead you to find out what these products are. You can then focus on protecting and further growing these product volumes.

Figure out the 80:20 in what controls your costs, too. This will allow you to focus on and pull those levers, should you need to.

Spend as much time as possible with the CEO and others in the C-suite to see where the finance team can help ease their pain

Team morale and focus

Over the first month, sit with each finance team member as they go about their job. Question them on what is working well and what is not. See who your champions are and focus your energy on them – they will grow under you.

Get your ideal team in place quickly and set up as you wish. If you don’t do this straight away, you will get caught up in the day-to-day struggle of getting hiring done.

You need an experienced accountant in charge of producing your statements. If the one you have is jaded or running bad accounts, replace him or her.

Business partnering

Being an interim, much is expected of you. You must quickly get a grasp on the figures, the finance team and the strategy – and start adding value.

Spend as much time as possible with the CEO and others in the C-suite to see where the finance team can help ease their pain. Your business instincts should then kick in and lead you to the major issues.

Then you can really roll up your sleeves.

About the Author

John Rowland is Managing Partner at strategic advisory White Lake Group and is currently engaged as consultant CFO with Bridge International Academies in Kenya. 

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