When I speak to Business Owners I quite often hear the phrase, “well my accountant does that”.
If you needed open-heart surgery, would you choose a GP or a cardiothoracic surgeon to carry out the operation?
Hopefully, you’d choose the person with the most relevant experience and skills—the cardiothoracic surgeon—to carry out such a critical operation. Of course, GPs are highly-skilled medical professionals too, but when it comes to heart surgery, you need a specialist in the field.
The same principle applies when it comes to hiring someone to take care of the financial health of your growing business. As your business develops and grows, the type of financial expertise you need will change.
Bookkeeper-> Accountant-> Financial Director
As a rule of thumb, if you employ less than 10 people, a bookkeeper may be perfect for your needs. He or she will be responsible for handling the day-to-day tasks of recording the company’s financial transactions (purchases, receipts, sales, and payments).
Suppose the company has between 10 and 30 employees. In that case, you will need a Finance Team leader to take care of functions relating to the collection, accuracy, recording, analysis and presentation of your organisation’s financial operations.
But if you have more than 30 employees, you should consider hiring a Finance Director (FD), whether on a full-time or part-time basis.
The purpose of an FD, according to The Institute of Directors, is to:
- Provide strategic and financial guidance to ensure a company’s financial commitments are met
- Develop the necessary policies and procedures to ensure the sound financial management and control of the company’s business.
An FD usually brings years of experience from working with some of the UK’s largest companies. Of course, you might not have the budget to hire a full-time FD. After all, the average salary for a full-time FD is about £90,000, according to recruitment specialist Reed.
Fortunately, you don’t have to employ a full-time FD. You can use the services of a part-time FD for a fraction of the cost of a full-time hire.
You can use your part-time FD on an as-needed basis, perhaps for a one-off project (such as raising debt finance) or for a number of days a week or even month during which he or she helps the company to work on its most pressing challenge such as improving cash flow or establishing KPIs (Key Performance Indicators).
Your FD can help your business in a variety of ways, including:
- Managing the finance function
- Managing cash flow
- Offering an independent ‘sounding board’ for the business owner/CEO
- Instituting budget reviews and forecasts
- Introducing monthly KPIs (Key Performance Indicators)
- Establishing processes to create monthly management reports
- Communicating with external advisors
- Raising equity or debt finance
- Entering new markets
- Exit planning
- Producing tax efficiencies
- Managing relationships with banks and other lending institutions as well as stakeholders and investors
- Managing risk
- Ensuring full compliance with legislation
- Helping you to find a full-time FD
- Providing interim cover while you recruit a full-time FD.
The time to call in an FD
Of course, you don’t need to wait until your payroll hits the 50-mark to hire a part-time or even a full-time FD.
You need an FD when you realise the financial information you receive, whether from accounting software or spreadsheets, is no longer fit for purpose. You may be aware that your current accounting system can’t provide the information you need to make critical decisions. You need actionable reports based on facts. You need someone who can interpret the numbers and tell you what’s important and what is less relevant. An FD can do this for you.
You might realise that you need someone to track and manage the company’s cash flow situation and to alert you to potential obstacles ahead. Again, an FD can do this for you. Your FD can help you to identify solutions to avoid a cash flow crisis that could put the company’s very existence under threat.
An FD will also help you to transform your vision for the future of the business into a realistic strategy, one that is robust and based on credible numbers and projections rather than vague wishes. A plan like that will help you to identify weaknesses and to develop solutions.
It will also help you when it comes to raising funding, so vital to almost every growing business.
Your part-time FD can help you to make sense of the funding market and recommend the best type of funding (lease finance, term loan, equity, or factoring, etc.) for the business. This will save you from pursuing the wrong funding options for your business.
Your FD can even liaise with banks or other funding institutions on your behalf.
A great part-time FD will act as an independent sounding board, someone with whom you can trust to help you solve business challenges as they arise. With many years of experience in supporting business owners, they can provide answers to the questions you might have about your business, such as potential threats or opportunities.
Best of all, having an expert FD overseeing your finance function will mean you are free to stop working ‘in’ the business and to do instead what you do best: to develop your business strategy and drive the company’s growth.
 ‘What is the role of the Finance Director?’, The Institute of Directors, September 25, 2018, https://www.iod.com