In the beginning, there was the business. It had no finance director, but it grows and becomes successful.
The owner has less time to think strategically and forward plan. There is no one to help him with that vital task. The owner becomes overrun with day-to-day stuff and constant firefighting. This saps energy and enthusiasm and business stops being fun.
I need a bookkeeper
The business hires a bookkeeper to help control the finances and do some of the admin. The owner now has more time for firefighting but not to think strategically.
The business now has some basic financial information but not enough to make important decisions. The owner now must manage the bookkeeper. The bank wants monthly management accounts and cash flow forecasts.
I need an accountant
The external accountancy practice who do the tax stuff, start to do the quarterly management accounts and forecasts. Some do a fantastic job, but they are not part of the management team and they have hourly rates. They are experienced in preparing annual accounts and tax compliance but are generalists and usually have no hands-on direct industrial background.
They have knowledge of a wide range of sizes and types of clients but none of the forged in the fire experience of a seasoned FD with a strong commercial background. The monthly accounting bills are increasing but the owner may not get the partner face-time or the specialist advice he needs. Strategic thinking remains on the wish list.
The management accountant or financial controller stage
The finances need constant attention. Costings, productivity and working capital control are now difficult to handle. The bank wants to replace the overdraft with a factoring facility. They also want monthly management accounts and frequent short-term cash flow forecasts.
The external accountants struggle with availability, depending on their other client demands. The partner is difficult to get hold of but always returns calls and emails and the fee notes keep arriving.
The financial controller’s role is to control the finances. They manage the ebbs and flows of cash around the business and understand the systems but the control element in their job-title is an all-consuming endeavour.
They help the owner with his firefighting, leaving little time for either to do much forward thinking. Their ability to think strategically may be untested.
I need a part-time finance director
The business is now bigger and more complicated – I need help
The business is now bigger and more complicated – I need more help
Many part-time finance directors may spend from 1 day a month at each business as a part time finance director. Most are experienced and qualified.
With the FD tool-kit of expertise, they help with financial management, reporting and investor relations. They free the owner’s time and contribute the information and the structured thinking needed for more strategic decisions. Business can be fun again.
The owner is now getting specialist industrial and financial skills for a fraction of the cost of a permanent employee, which is cost-effective. Management information is now high quality, faster, and more useful. Raising finance becomes easier as banking relationships are nurtured with quality data and the owner has a sounding board to help him think strategically.
The business continues to grow. Management becomes more challenging and complex. Turnover is more than £10m, the demands on the owner’s time are immense. He is getting further away from using the skills which were the original basis of the business. There are many staff to lead and manage. The portfolio finance director needs to step up his involvement.
The owner expects fast financial reports, a strong commercial contribution and positive management of the relationships with bankers and investors. Also expected is the management of HR, IT, operating systems and future developments. The strategic requirements are for strong commercial, planning and forecasting skills with an ability to critically evaluate competing scenarios.
A good FD is the managing director’s wing man. A powerful second in command due to the information they control and their wide ranging commercial experience. Choose wisely because a good one is worth their weight in gold.