I am regularly asked why a business should have a finance director when the business owner already has an accountant who completes his/her annual report and accounts?
The answer is that they perform very different roles. As a keen archer, I use the analogy of receiving a report of your scores at the end of the year, to having someone on the field with you during that year.
Your club captain may send you a report at the end of the shooting season showing the number of rounds shot, the average score per round the number of “golds” hit etc., and how that compares to the previous year. This can be both useful and interesting, but not necessary helpful in pushing you to be a better bowman. This is what your accountant will provide at the end of your financial year. Your annual report is needed to comply with your reporting requirements, but it is not so helpful in terms of generating a better business.
Now consider your club coach. That’s the person who is out on the field at your side; watching how you shoot, walking the range with you, looking at where the arrows land, suggesting how to change the sights on the bow, your stance or how you pull the bow back. He is like your Finance Director. After you fire six arrows you and your coach, will walk to the target, look at where the arrows landed, score, compare your performance to the last six arrows, and then walk back to the bow to make any necessary adjustments before firing the next six arrows. Then walk to the target again etc. They are fully involved in your performance, showing an interest in you, they mentor you, helping you to improve gradually over time.
What does a FD do?
Your FD will:
– Produce monthly detailed management reports showing how the business has performed over the period
– Compare it with previous periods and to your target
– Suggest actions necessary to improve the performance of the business
– Even walk the site with you to get a clear understanding of how the business is performing
Just like your coach they become part of the team, helping and mentoring not only yourself but the rest of the team thereby helping the business to achieve its targets.
Some businesses respond saying that their accounting system or their Accountant, provides monthly accounts. Which they may do, but who then sets the budgets and targets, who interprets the numbers on the report, explaining what the numbers mean, and gives you the business behind the numbers. If you are doing this, ask yourself are you being realistic or challenging with your targets, how long does this take when you could be working on growing your business or dealing with operational/regulatory issues.
An experienced finance director will also:
– Support you when dealing with your accountant or bank
– Have the knowledge and skills to understand the questions being asked and what information is required
– Deal with suppliers to ensure you are getting value for money
– Have contacts to help reduce your costs.
– Add credibility to fee increase demands, supporting and defending the true cost of your business
By using a part-time finance director, you only pay for what you need, there are no overheads. Most part-time FDs add significant value over and above their cost to the business.
This blog has been written by Peter Stamps, Client Finance Director with Tectona Partnership.
To find out more about hiring a part time Finance Director or if you would like to discuss any of the topics covered above further with Tectona Partnership, please contact Mark Nicholls on 07818 407061.