"Does my business need a finance director?" is a question often posed to financial consultant Adrian Goodman. If it's one you are pondering for your business, here's what he has to say.
THIS IS A QUESTION I often see doing the rounds on LinkedIn, usually posed by a business owner who has beentold that they need one, but wants to be sure before they commit. The inherent danger with asking questions on a public forum is that the qualified viewpoint mingles with anecdotal, often negative, opinions, which are generally stated more forcefully. Throughout my career, I’ve heard plenty of horror stories, where an ‘incompetent’ FD has damaged or destroyed a business and, while I can’t deny that it does happen, it can also be a case of the business appointing a Finance Director without really knowing what they’re getting into.
To start with, there’s a huge difference between a seasoned Finance Director, and a relatively inexperienced junior FD. Most SMEs do not have the budget, or sufficient director- level work, to attract and retain a higher level Finance Director, which means they often end up with a cheaper and less able alternative, although no lessexpectation is placed on their shoulders.
So what is the answer? At what point should a business look for a Finance Director?
Firstly, turnover is irrelevant. A simple but well-established distribution business could have revenues of £30m, while a complex, developing, multi-site organisation is turning over less than £10m. The smallerbusiness needs significant strategic direction while the larger organisation is doing just fine with a competent Finance Manager.
In my experience, the key considerations are as follows:
- Do you understand the role a Finance Director plays in a business?
- Do you frequently need high-level Finance support (eg to assess opportunities, provide strategic direction, or liaise with external parties)?
- Do you need a permanent solution or is this a short-term need?
- Can you afford (or at least justify) the expense of a Finance Director’s salary, which will often include a bonus, car and other benefits in order to be competitive?
- Will your chosen FD find the work stimulating, or will they get bored and move on, effectively wastingyour time and money?
If the answer to these questions is ‘Yes’, then you probably need a Finance Director, so do your research and make sure you can interview effectively. It may be useful to ask an accountant or other trusted finance professionalto help you review CVs or attend interviews.
If you’re not quite ready for a full-time FD, you may want to consider alternatives, such as:
- A part-time or interim FD – Access to financial expertise when you need it and although day-rates can seem steep, it’s nothing compared to the cost of a full-time permanent role.
- Find the right level – A capable Management Accountant, Finance Manager or Management Accountant may be a more appropriate fit for now. You can always re- assess later
- Develop from within – Supporting one of your existing team through an accounting qualification canbe a great way to grow an ‘organic’ FD, with plenty of intangible
If you’re still not sure, PPX can help you to assess your needs and propose a solution. Feel free to get in touch.
Adrian Goodman is managing director of PPX Consulting.
01536 856740