Sign up to receive accounting tips, videos, news and webinar info before anyone else
Mailing Address
21750 Hardy Oak Blvd
Ste 104 PMB 63328
San Antonio, TX 78258-4946
(760) 697-1033
Is your Chief Financial Officer (CFO) underperforming? Or, perhaps they’re no longer satisfying your company’s needs due to growth, a change in mission, or other reasons. Whatever the case may be, sometimes letting go of a chief financial officer is the only option you’re faced with to keep your business running at optimal levels. Whether due to performance, ethics, or a misalignment with company goals, terminating a CFO must be done carefully to protect your business and reputation. That’s why we’re offering valuable suggestions on how to fire a CFO in a professional and amicable manner for all parties involved.
Identifying the Right Reasons for Firing a CFO
Before you fire a CFO, you should clarify why the financial officer is being let go. Common reasons include:
- Poor financial performance.
- Strategic misalignment.
- Breach of ethics or trust.
- Poor leadership or communication skills.
Document any supporting evidence. This may include evaluations, financial data, or board discussions. A strong case reduces legal risk and confusion during the transition.
Reviewing the CFO Contract and Planning for Legal Risks
When you fire your CFO, legal and financial obligations are often involved. Review the CFO’s employment contract for:
- Termination clauses.
- Severance packages.
- Non-compete or confidentiality terms.
- Notice period requirements.
Work with legal counsel and Human Resources to ensure you are properly covered and that the process is handled professionally.
Creating a CFO Transition Plan to Maintain Business Stability
A well-planned transition will minimize disruptions to your finance team, leadership, and operations. Your plan should include:
- Who will take over financial duties in the short term?
- Access management for financial software and data.
- Internal communication protocols.
- A hiring timeline for a new or interim CFO.
Consider bringing in a fractional CFO or using an outsourced CFO service as a temporary solution while you search for a long-term replacement.
Choosing the Right Time and Approach to Fire a CFO
The critical question here is when to fire your CFO. If possible, avoid firing a CFO during a critical business period, such as a funding round, audit, or year-end close. When the time comes, conduct the conversation in a private and respectful setting. HR or legal personnel should be present as witnesses.
Keep the message direct, firm, and professional. Express appreciation when appropriate, but focus on facts, not emotion.
How to Communicate a CFO Departure Internally and Externally
Part of understanding how to fire a CFO involves being aware of the potential impact the departure of a CFO can have on staff, stakeholders, and potentially the public. Your messaging must be clear, concise, and aligned with the company’s values.
Internal messaging should:
- Notify the leadership team and key finance staff first.
- Explain who will step in and what the next steps are.
- Emphasize continuity and company direction.
External messaging should:
- Be brief and professional.
- Reassure clients and investors that operations are stable and secure.
- Introduce an interim CFO or search timeline if needed.
Protecting Company Financials During and After the CFO Exit
When a chief financial officer leaves, securing your financial systems should be one of your first actions. Their access to banking platforms, payroll systems, accounting software, and internal reports should be revoked as soon as the departure is official.
You’ll also want to recover company devices, reset passwords, and inform your financial institutions about the change in leadership. Assigning a new internal point of contact helps avoid confusion with banks, investors, and vendors.
Depending on the circumstances of the exit, a brief internal review of recent transactions and system activity may also be wise. This ensures that nothing has been overlooked and that all responsibilities are accounted for. Acting quickly and carefully during this period helps maintain stability and protects your business from risk.
When to Hire a Fractional CFO as a Temporary Solution
If you’re not ready to hire a new full-time CFO, a fractional CFO can offer strategic financial guidance on a part-time basis. This can:
- Help maintain leadership continuity.
- Support financial reporting and forecasting.
- Allow more time to find the right permanent hire.
Fractional CFOs are a flexible option for growing companies or during leadership transitions.
Learning From the Experience to Avoid Future CFO Turnover
Once the transition is complete, take time to reflect on what led to the CFO’s departure. Was it a hiring misstep, unclear expectations, cultural mismatch, or something that could have been addressed earlier? Reviewing the process with your leadership team can uncover gaps in how you evaluate and support executive roles.
Use what you learn to improve how future CFOs are recruited, onboarded, and held accountable. Set clear performance goals, maintain regular check-ins, and make sure alignment with company values is part of the conversation from the start. A thoughtful review now can help reduce the chance of repeating the same issues later.
Frequently Asked Questions About How To Fire A CFO
Who is responsible for firing a CFO?
In most companies, the CEO is the one responsible for firing the CFO. In some cases, especially in public companies or those with a strong board of directors, the decision may involve board approval or a vote. If the chief financial executive reports directly to the board (as in some nonprofits or private equity-backed firms), the board may take the lead. HR and legal teams typically support the process to ensure it follows contract terms and employment law.
What should I look for in an interim CFO?
An interim CFO should have experience managing financial transitions, strong leadership skills, and the ability to quickly understand your company’s systems. They should be comfortable stepping into high-pressure situations and maintaining financial reporting and compliance without handholding. Bonus if they’ve worked in your industry before.
How long should a CFO transition period last?
It depends on the size and complexity of your business. For smaller companies, the transition typically takes 2 to 4 weeks. Larger companies often need 60 to 90 days or longer. If you can plan ahead, a phased transition where the outgoing chief financial officer helps onboard the new one is ideal, but it’s not always possible.
Can firing a CFO hurt investor confidence?
Yes, sudden leadership changes can raise red flags for investors and lenders (especially if the departure is unplanned or poorly managed). The key detail of knowing how to fire a CFO is in clear, proactive communication. Ensure that your financial leadership remains stable and that operations will continue smoothly during the transition.
Should the CFO be involved in training their replacement?
If the separation is amicable, involving the outgoing CFO in the transition can be helpful. They can hand off reports, walk through financial systems, and provide context for strategic plans. But if trust is broken or the firing is for cause, it’s safer to limit access and move quickly.
What happens to the CFO’s board or investor relationships?
The CFO may have built strong ties with your board or investors. Be prepared to reassign those relationships quickly. Communicate directly with board members and explain who their new point of contact will be. A clean handoff helps maintain confidence and avoids confusion.
Read More >>>
Matt Garrett is the Founder and Chief Executive Officer of TGG. He is a regular speaker across the country on behalf of Vistage educating business owners on the need for sound financial practices, and is Vice President of the Board of Directors of FINACA. Under Matt’s leadership, TGG has received the following recognition: INC. 5000 top companies in the U.S. five years in a row; one of “San Diego’s Fastest Growing Companies” the past four years; and is among San Diego’s “Best Places to Work.”
