Managing the finances of a growing business can be challenging. A Finance Director can help mitigate these challenges through managing the financial strategy of the company. You may have a clear vision of what you want to achieve and, using a Finance Director will help articulate that vision into a business plan. They can also work with key management to measure business performance and position, understand where factors have changed in the plan and produce financial models demonstrating the impact.
A financial director provides financial insight into a business’s performance and position, will be able to offer guidance as to whether the business is on track to achieve its strategy, and work with key management to understand where the business is and what needs to be done to meet objectives.
Alongside all this, a Finance Director will bring value commercial and financial insight into the business, helping it achieve its growth.
What is a Finance Director?
A Finance Director is more than a number cruncher, producing spreadsheets full of figures for senior leaders to interpret.
A Finance Director is part of the key management team, offering not only financial information on the business’s past performance but providing budgets and financial models giving insight into what the future business performance will look like, and articulating the impact that key decisions will have on these figures.
Finance Directors also work closely with the key management of the company to ensure that assumptions made about future business growth are accurate and still relevant. They will provide insights into what the numbers mean and articulate the impact decision-making has on the plan.
Responsibilities of an FD
A Finance Director’s key responsibility is to navigate the financial side of business growth and work with the key management to deliver the company’s business objectives.
Finance Director’s main responsibilities are:
- To help the business achieve its goals by providing guidance and advice on the financial side of the business.
- To support key management to ensure that they understand the plan, and what the regular management information means and guide the financial impact of decision making. Also, to provide support and answer financial questions that they need solutions to as part of their job.
- To manage the financial side of the business, including ensuring that there is enough cash flow for the company to operate.
- To make sure that necessary accounting processes and controls are in place to deliver accurate financial information to key decision makers.
- To ensure that the right finance team is in place, with the right skills in the right job to manage the routine tasks within the finance department.
- To provide management information to measure the business performance regularly.
- To work with external contacts such as the accountant, banks and finance providers.
When should I hire a Finance Director?
The point at which a business should recruit an FD varies. The main reasons you may need a Finance Director are as follows:
No business plan
You may have an idea of what you want to achieve in your head, or on a piece of paper, but do not have the skills to put this into figures and create a business plan and financial forecast.
No up-to-date accounts
As a business owner, you need visibility of how much profit you are making, as well as how much money customers owe you, how much money you owe suppliers and HMRC, what costs the business has and what your break even point is. Without this data and analysis, it is difficult to be able to make key decisions.
No systems in place
As a business grows, necessary systems and procedures will need to be implemented to record financial data. The existing finance team may not have the skills, or you may need an external review, to ensure that the correct controls are in place to deliver the information you need.
Cash flow difficulties
A business can be extremely profitable but have no cash in the bank to pay the bills. Financial Directors will have the ability and knowledge to understand the business’s cash flow, identify any inefficiencies and work with key partners to gain access to the necessary finance to help fund the gap.
Despite having great products or services, if the business is not making a profit it will eventually run out of cash. A Finance Director will work with the business to understand the different parts of the business, which areas are profitable and which are making a loss. They will also come up with a plan of what needs to be done.
Every business owner will need to exit at some point. This could be selling to an external party, selling to the management of the company or part selling.
Working with a Finance Director can maximise the value of the business as well as help to navigate the process.
Most businesses will leave it too late to recruit a Finance Director, due to the misconception that a full-time FD is the only solution. However, there are other options to consider such as cost savings solutions in the form of a part-time FD or using a firm of chartered accountants that have outsourced FD services.
Often a part-time Finance Director or an outsourced FD can prove to be a useful stepping stone as the business grows.
What is the difference between a CFO and a Finance Director?
Only large businesses tend to have CFO’s (Chief Financial Officers). They typically have more responsibilities than the finance function and are part of the main group board. CFO’s have a lot more strategic expertise than Finance Directors as they tend to work at a much higher level.
Is the Finance Director higher than Finance Manager?
A Finance Manager will create the accounts and data but may not have the experience or expertise to provide the analysis and interpretation against the financial plan.
A Finance Managers’ job is to support the Finance Director in the day-to-day running of the accounting and finance department, including managing the team. A Finance Managers skills tend to be in the operational use of a finance function, whereas a Financial Director has more strategic skills.
Financial Directors play a key role in a business’s growth and can offer key support to key management. Whether you opt for an outsourced, full time or part-time Finance Director, the timing of when an FD is brought into a company is key, so be aware of the reasons and take action before it is too late.
Spotlight Accounting is a firm of chartered accountants that offer FD services. We have a proven track record of working with clients to help them understand their financial goals and provide the service they need to ensure they are on track.
You can find more about our FD services by contacting us today!