When you think of a Finance Director (FD), what comes to mind? Calculators, spreadsheets, counting, addition, the list goes on.
Perhaps you’ve been advised to seek the help of a part-time or full-time Finance Director. However, do you know what their role is and how they can help you? Fortunately, this is precisely what this article aims to address.
Besides demonstrating why you should consider utilising the expertise of a professional, certified FD, we will look at how the role has changed slightly. Traditionally, finance directors were used to helping large or medium-sized businesses.
Thus, this is why people relate terms like “spreadsheets.” However, if you have the right FD for your business, it can open many doors.
Why would I need a Finance Director?
Reverting to our original question, what comes to mind when you think of a Finance Director? If you have a small or medium business (whether it’s a new start-up or an established company), you will eventually need to recruit the help of an FD. Perhaps your thinking that your business is too small to need any outside help. However, a Finance Director can be an invaluable asset, regardless of the size of your business.
For instance, FD’s were traditionally employed to help manage finances. Now, when we say finances, we’re talking about high-level accounting, including accurate financial statements (weekly, monthly, bi-monthly). However, as the world of business has evolved due to the advent of technology, i.e., accountancy software like QuickBooks.
In the past ten years alone, the business world has scaled, more and more people are acting on their entrepreneurial instincts. Yet, they reach a point where they cannot manage their finances correctly. Unfortunately, the rate of small businesses that fail in the first year, according to Fundera is 20%. The bad news continues, as 30% of SMEs fail after year two, and 50% fail after five years.
Oh, and the statistics don’t end there. How many businesses are still operating after ten years? Take a guess… Well, Fundera, states that 70% of SMEs fail after or before their tenth year. Now, we don’t know about you, but taking the confidence to start a new business is hard enough.
Perhaps, you’ve had a light bulb moment, or you are adamant that you want to see your company succeed. Well, this is all possible. However, it is unlikely that you can maintain a business, let alone scale without professional help.
Now, we are not saying you need to employ a Finance Director straight away. What we aim to demonstrate is why you should look into hiring a professional FD. Again, you might not need a full-time FD straight away – but if you plan to scale, this is something that you will need to consider.
You might be seeking the help of a part-time finance director because you’re raising capital. Fortunately, an FD can assist you with more than counting numbers, they can advise you, besides providing you with accurate, important financial reports to show your potential investors.
How can a Finance Director Help your Business?
First, we need to address the elephant in the room, and that’s the key role of a finance director. Generally, this particular professional is similar to an enigma in the business world. People, including experienced business owners, often get confused as to why they need to utilise an FD. This confusion is normal, so don’t worry, because we’re going to give you a summary of the key roles and responsibilities of an FD.
You might already have an accountant, as well as a bookkeeper to help manage your finances. However, an FD plays much more of a strategic role. Below, you will find six of the key responsibilities that your FD should be managing. Even if you only hire a part-time FD, or you have a permanent in-house Finance Director, their role will still be the same.
We believe that the best way to describe a Finance Director is the CEOs or MDs right-hand woman/man. Besides the high-level accountancy services, they should provide you with continuous support, advice, and guidance. In turn, this will ensure that your businesses goals are viable and are in-line with your projections and financial objectives.
A Finance Director is a little different from your typical accountant. This particular professional can help you to create an achievable strategy. Besides this, they will offer you their expertise, as they understand how to analyse your financial data (from your books, financial statements, etc.).
They should also assist you (or the MD/CEO) to identify business opportunities, like raising capital. Furthermore, they will create strong plans to improve your company’s core functions, including distribution, marketing, remuneration policies, and pricing.
We’ve touched on this business area already in this article, so we’ll stick to the same topic of “raising capital.” Pitching to investors is hard enough, and it will be difficult if you do not have the figures, insights, and business growth plans to hand.
Your FD will assist you in all aspects of your pitch, and they will encourage you to seek beneficial opportunities to maximise business growth. More importantly, they will ensure that you receive the best possible deal.
Thus, they will help you to minimise the risk of your business. In turn, this assistance should warrant your return on investment concerning their fees (freelance) or salary (in-house).
4. Minimising Risk
Following on from the above point, one of the primary tasks that FD’s undertake is assessing and identifying potential risks. Now, these risks include your market, regardless of how niche your SME might be, as you can hire specialist Finance Directors, via a third party accountancy company. Moreover, their specialism will usually be in line with your industry. Thus, you can ensure that they will notify you if there are any changes or potential industry impacts or fluctuations in the market.
If you’re thinking, wait, isn’t the MD/CEO the primary leader? Well, yes, that is true. However, what we mean by leadership is financial expertise. Moreover, every department (even if you’re the sole employee), needs to continuously improve procedures, systems and policies. Furthermore, you can ask your FD to act as a leader to specific teams or departments, as well as ensuring that your goals have been conveyed/explained accurately.
6. Metrics and Reports
It would be an understatement to say that the CEO/MD needs a clear view and understanding of what is happening in their business. Well, this is where you can leverage the high-level accountancy skillset to warrant your company’s longevity and stability. If you hire a skilled FD (on a full time or part-time basis), then they should be able to generate and analyse accurate reports and metric confidently.
If you’re an established business owner, you will know the importance of accurate figures – now, we’re not just talking about bookkeeping. For instance, you can continue to manage your books and still have a part-time Finance Director.
Ultimately, if you employ a Finance Director through a company like Pearl Accountants, they can capably generate, analyse, and interpret your data to help simplify all aspects of your decision-making process.
We can say with certainty, and from our experience that there will come a time when you need to find an FD. Now, you might only be at the start-up stage, or you’re thinking of starting a small business. However, believe us, you will reach that “light-bulb” moment, especially if you are struggling to manage your finances.
Finally, it is very easy to find a reliable, fully-qualified FD, if you know where to look. Fortunately, you’ve found Pearl Accountants. We work with a range of professional FDs who can create a bespoke service to ensure the longevity and growth of your business.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.