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CFO for hire

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Barbara Palmegiani recalls her “a-ha” moment several years ago.

Prior to joining BDO Canada as partner and national CFO services leader, she spent more than a dozen years helping lead several different small and medium-sized companies through everything from financial growth to operational restructuring.

“What I saw was that, traditionally, many organizations treat the finance function as more of day-to-day accounting: keep the lights on, pay the bills, manage the cash – those types of things,” she says. “Yet at the same time, they recognize that they needed to do things differently, whether that was due to a disruption in the workforce or disruption as a result of technology evolution.

“The challenge is, many of these organizations aren’t necessarily of the size where they need a full-time CFO, nor do they want to pay for one. That’s where I saw the part-time or interim option coming in as a way to allow companies to upskill their finance function in a cost-effective way.”

Today, Palmegiani’s prediction appears to be prophetic as many companies are now adopting fractional chief financial officer models offered by firms such as BDO.

On a wider scope, a recent global outsourcing report by Deloitte found that service providers are increasingly being relied upon to provide on-demand access to hard-to-source talent and expertise on technology and transformation that keeps pace with the continuously evolving business environment.

This shift toward “operate services” signals the desire to deliver core capabilities in collaboration with service providers, aiming for elevated business value creation, noted the report’s authors.

When it comes to outsourcing financial functions, Palmegiani says she’s seeing this shift primarily with small and medium-sized businesses that want to better transition to unexpected business opportunities, realize cost efficiencies or simply weather swings in the market.

“Companies are absolutely pivoting more quickly. They’re much more open to taking a creative approach to talent management that we absolutely were not seeing before,” she says.

“There’s just so many examples post-pandemic of businesses that have bounced back from ‘Survive, Revive or Thrive’ mode and are now seeking a higher skilled more seasoned finance professional to work alongside them and help get them where their agenda wants them to go.”

Clayton Achen, co-founder of Calgary-based accounting and tax firm Achen Henderson, has similarly seen a change in how companies are approaching its financial functions.

“Our biggest customer right now is an oil and gas services firm. And, of course, the last several years have been very tricky in that industry. It’s had ebbs and flows. So, they scaled back. And then, more recently, started scaling back up. And we’ve been able to scale with them.”

Yet that’s not the only reason Achen believes many companies are shifting toward fractional CFOs. He believes it stems from many entrepreneurs not getting what they need from traditional models.

“A bookkeeper, controller and CFO, these are all very different roles,” he says. “The idea that a bookkeeper needs to also be a CFO is like trying to fit a square peg into a round hole. It just doesn’t work.”

As a result, Achen believes there’s a huge disconnect in the marketplace between what companies want and the money they’re willing to spend.

“It’s pervasive in this $1-million-to-$20-million sales range,” he says. “They want to have the big sales and big results but are not willing to spend two or three per cent of those sales on their accounting functions. They want to spend a fraction of that. And yet, they can’t understand why they’re not getting the results.

“What we try to do then is have conversations with those entrepreneurs to get over that hump of understanding that they have to make these investments in their business in order to get the results that they want.”

Calgary CFO Consulting Services president Andrew Jonsson is similarly seeing many of these situations play out first-hand: “a bookkeeper who has turned into a controller and hit a ceiling. It then turns into a situation where the organization starts flying blind, and they end up making decisions without the insight they need.”

These days, Jonsson finds himself helping companies be proactive when it comes to their financial functions – and it’s led him to working a lot with early-stage organizations doing what he calls everything from “A-Z.”

“It’s dealing with board of directors, banks and key stakeholders, budgeting, cash-flow management, business plans and strategic plans,” says Jonsson, who currently serves as a fractional CFO for companies in the green hydrogen, agriculture technology and medical technology sectors.

“I wouldn’t say there’s a common thread in what’s commonly led companies like these to me. It’s a little bit of a blend … from triaging certain situations to helping them look down the road and get their house in order so they can properly execute business plans.”

For organizations considering outsourcing their CFO functions, Achen says don’t fall for a one-size-fits-all solution.

“If you get in with anybody who comes out and says, ‘I’ve got this rigid program and these are the services that I’m going to provide to you,’ they’re doing that before they understand the needs of the business owner. You’ve probably found the wrong person. That’s not going to work,” says Achen.

“Fractional CFO is not as scalable as bookkeeping is. It requires a personal touch.”

He also notes a fractional CFO model works for companies of all sizes.

“Whether you’re a solopreneur construction person or a marketing person with two people on your team, we’re going to start off with the same building blocks as we would start off with the bigger company,” he says.

Jonsson, meanwhile, suggests business owners do their homework on the type of horsepower and experience that they’re looking to bring on.

“Have a really good understanding of where you think your business gaps are,” he says.

In fact, Palmegiani says many clients don’t know what they need because they haven’t worked with a seasoned CFO in the past.

“So, it’s very important that we get an understanding of their business,” she says. “The size of their business matters. The industry that they’re in matters. The complexity of their business matter. And so, it’s a very bespoke, collaborative approach to determining their needs.”

Palmegiani also suggests organizations don’t see this as being outsourced. “We’re actually becoming the continuity in organizations.”

Lastly, look for those “a-ha” moments.

“I think ‘a-ha’ moments are a good way to measure the value of your CFO,” says Achen. “If there’s light bulbs turning on and you’re making decisions in your business because of those ‘a-ha’ moments, you probably found the right person.

“And I don’t think it should take six months to get there. A good CFO will have you changing your thinking and making decisions within weeks. This doesn’t mean you’re going to turn around your business within weeks, but you should feel really good about the relationship – and you should be making what were previously very uncomfortable decisions.”

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