As companies grow their needs change and nowhere more so than in the area of financial control. Where before they could get by with accounts assistants, management accountants and external accountants, as a company expands it needs more strategic financial input.
What do they do?
A Financial Director is a major part of the executive team, providing financial control for the business. They head up the Accounting function for the firm as you’d expect and set the standards and practices that the team are held to. The FD will also have a hand in forming policies and procedures such as those for expenses and credit card spending as well as keeping a weather eye on the day to day money situation.
One of the most important aspects of a growing business is keeping control of cash flow and the company FD will be in charge of guaranteeing that the funds are available for development opportunities, either by ensuring that cash can be found from organic profits or raising money externally through debt or equity.
Accountants are often portrayed as shy and retiring employees with little in the way of social skills, however a key skill needed for the position of Financial Director is stakeholder management. Typically your FD will have to deal with the Bank, External Auditors, HMRC, Landlords and any number of external agencies that need to contact the company. Typically the main focus will be with investors who will require access to more detailed financial information and can sometimes be somewhat demanding. A top drawer FD will be a people person, being on top of the numbers but also able to engender confidence and respect and showing that the shareholder money is invested wisely.
Like any top executive, the FD will be able to work well as part of a team, building alliances and persuading people to a point of view rather the being able to shout loudly! Studies have shown that executive teams that seek consensus tend to make better decisions that those featuring conflict and argument.
The management team will set the strategic direction for the company and the FD will be a key part of the discussions. Often, the outline plan will be developed and then further analysis and forecasts will be produced by the finance team to allow a choice of direction and tactics to be made. Clearly this responsibility will lie with the FD.
The FD will provide challenge back to the business. When forecasts are made then the finance team will be responsible for checking that they are reasonable and realistic. When the results are in they will check the accuracy of the results, report back to the business and challenge where it seems that things haven’t gone as expected. Similarly at budget setting time they will be in the vanguard, ensuring that the business isn’t building fat for the future.
One of the biggest benefits of a great FD reported by CEOs is having a peer who can act as a listening ear. It may seem to be a cliché but it is lonely at the top and having the chance to talk over problems and challenges in confidence Is a valuable asset for the MD.
The FD will often run special projects such as mergers, acquisitions, sales and at times when things maybe aren’t so great will provide advice on aspects such as redundancies, trimming costs and avoiding going into administration.
Having a full time Financial Director may seem like an unnecessary expense for a small firm and it’s fair to say that you have to pay top dollar to get the best. However for medium and large companies the position is a ‘must have’. The benefits of a Financial Director aren’t out of reach for smaller companies though. There are many part-time or ‘portfolio’ FDs who specialise in working for a few hours per month for many companies. This means that they get the advantages of the FDs greater network and experience but at a fraction of the cost. There are organisations that specialise in providing FD services for smaller businesses and of course the company auditors or accountants can be approached to provide the function on an ad hoc basis.
It’s clear that the position of Financial Director can bring benefits beyond just the accounting and finance function and it is an area well worth considering as soon as possible for firms of all sizes.