Having access to a finance director (FD) helps you get control over your company’s finances and management reporting. But the value should go way beyond just dealing with your business numbers.
As an owner manager there are a multitude of areas where you need support, advice and guidance. This is where the detailed knowledge of an FD should make a key difference.
Chris Collins, Partner at Haines Watts Esher, explains how the outsourced FD service he delivers for clients has built up trust and delivered true business value.
The need for FD-level advice
Our FD Solutions service was something I initiated a few years ago. It came out of clients asking us to fulfill a need that amounted to finance director level advice for their business.
Some business owners are wise to the benefit of having an outsourced FD – they know this will add value. Whereas other business owners may not realise that they need this higher-level advice and support. Very few businesses have a perfect in-house finance capability – this is where our outsourced services have come into play.
An FD’s role is to get the finance function up to speed but they should also be providing the high-level oversight and strategic guidance that’s needed to achieve your goals.
Solid numbers as a key starting point
There’s a common misconception that the FD just deals with the numbers, but that fundamentally misses the point of what a good FD should bring to your business.
The numbers are very important, but they are a basis for discussion. With the developments that we’ve seen in software and reporting, the numbers can be accurate, complete, up-to-date and in a format that gives you what you need as the business owner.
As the FD – that should then give you the basis to shift to a higher level of strategy and decision making.
Getting your management information in shape
The numbers provide the foundation that drives your management information – so it’s vital to have access to the right information, in the right format.
As an example, if you’re running a business with multiple branches, you need to be able to see drilled-down figures for each site – so you can make comparisons and see which ones are (or aren’t) profitable.
If your business can’t do this, then the first job is to redefine your accounting process and your management information process so it’s possible to drill down in this way. That way you can see the turnover, the expenses, the overheads and the profits for each location – and that helps you make the important decisions.
Financial management information is invaluable in assisting you, as the business owner or your management team. It is the stepping stone to defining your strategy and your decision-making.
Understanding what you want from the business
To truly help you move forward, the FD needs to understand what you want from the business as a whole. That means getting to know you as an individual and finding out what your personal and business goals are. Your mindset as an owner is the starting point to pin down your aims for the future.
It’s about understanding your business, understanding you and knowing what you want to achieve – whether that’s bigger profits, growing the company or exiting the business in the future.
The benefits of deep industry experience
A really key benefit of working with an experienced FD is the variety of industry experience. We can call on expertise in a wide range of industries, and understand what the best business model is, how effective pricing works and how to manage things like cashflow in the most efficient ways.
We know what’s best practice in your industry, how other businesses in your sector are performing and what’s helping them perform well.
Bringing an outside perspective to your strategy
A big part of being an FD is bringing in the perspective of an objective outsider. You have to look dispassionately at the health of the business and flag up the issues and the areas that are ripe for change.
The smallest things can make a difference to your business. As an example, a client running a bar and restaurant, to lower costs, started buying the cheapest steak.
Steak is obviously a popular choice, and with this cheaper product a lot of people started complaining, sending their steak back and – more importantly – not coming back for repeat business. That had a knock-on effect on the numbers for the whole bar. In those kinds of circumstances, it can be hard to identify exactly what the problem is.
In this case, we pinned it down to the cheaper steak. The owner decided to double the price for the meat he was buying, that upped the overall quality of the steak served and their customers were happy again. With happy customers, the restaurant started doing well, so did the bar and the financial problems were gone.
Tailored support throughout the business journey
Supporting the business owner when the going gets tough is critical. The steak example may sound quite trivial at first, but this bar was losing money for seven months, all because of one poor decision about meat.
However, because they had good systems and good management information, we could drill down, see where the problem was and come up with the right solution. When you make small changes, the benefits can be exponential – a happy diner will spend more on wine, on cocktails etc. and up the overall spend.
Having those chats, diving down into the numbers and helping to turn a loss into a profit – that’s where the real benefit lies for a big chunk of the FD relationship.
Your FD. Your trusted adviser.
Ultimately, your FD should become your closest and most trusted adviser. There to help shoulder the workload and pressure of being at the top of the business.
Yes, they supply the numbers for you, and the management information needed to show if you are (or aren’t) performing to expectation. But those numbers are the conversation starters that form the solid foundations for the real value-add elements of this role.
The best finance directors bring objectivity around your strategy and thinking, and an understanding of the emotional impact of decision-making in the business.
The icing on the FD cake should be the experience, industry knowledge and understanding of best practice in your sector.
Does your FD give you the edge that you need to become profitable, grow your business and achieve your long-term goals?
Do you need an outsourced FD? Answer 10 questions to find out here.
Get in touch with our Surrey business advisors about our outsourced FD and advisory services. We would love to become part of your business’s journey.
Haines Watts Esher are chartered accountants providing business advice, strategy and virtual FD services to owner managed businesses.
Want to know more? Call us on 020 8549 5137 or email firstname.lastname@example.org