In big companies the Finance Director is often the second most influential person after the Chief Executive and obviously plays a key role in the management and development of the business.
You see the same issue from the huge corporate PLCs to smaller PLCs to the subsidiaries of those groups.
In a very big company the finance director has a team of highly paid and highly qualified accountants and even in the 200 to 1,000 employee businesses, the finance director has the support of other accountants.
It begs a few questions like:
"What is the role of a finance director?"
"What does a Finance Director do?"
The Stereotype Role Of A Finance Director
The stereotype image is of someone who says NO a lot.
Can I spend this money? No.
Can I hire another three salesmen? No.
The finance director keeps a very watchful eye on the numbers but what else does a finance director do to become such an important part of a professional managed business? (I use the term "professionally managed" to describe a management team paid a salary and bonus rather than being major shareholders).
The Real Role Of A Finance Director
The focus is on the future of the business and how it generates profit and cash going forward.
Believe it or not the finance director is usually more interested in revenues and margins than costs because that's where the real big growth potential lies in most businesses.
Cost cutting can only go so far although when times are tough, it is necessary to take away any surplus resources that are not essential or creating more value than they cost.
The finance director is interested in both
- effectiveness - doing the right things and
- efficiency - doing things well with the minimum of inputs
Sometimes the finance director can play devil's advocate to make sure an idea is backed by a robust and sensible plan and likely to lead to success.
Other times the role of the finance director is to play watchdog, to make sure that action is happening on approved projects and things get done right.
Since most projects involve spending money up front and require time and commitment to make progress, the finance director will be keen to stop waste from projects started but never finished unless prospects have changed and it makes economic sense to abandon it.
I thought this article on on the role of Finance Directors was quite interesting.
The Role Of Part Time Finance Directors
For big companies the work of the Finance Director may be a mystery to all but a few in the inner circle of top management and the second level of the finance function.
But this question is critical if those who to promote themselves as a part time Finance Director (also known as Virtual Finance Director, Flexible Finance Director, Freelance Finance Director).
In the permanent jobs market, a finance director's vacancy happens because there was someone else in the role and a replacement is needed or the management team has decided they need more financial advice and support than they can get from their internal finance team and external financial advisers.
By advertising the position or contacting recruitment agencies and headhunters the company has take proactive steps to find someone.
It's often not the case when promoting part time Finance Director services to entrepreneurs and business owners who don't employ a Finance Director.
Sometimes an entrepreneur may hear about the part time finance director role and search on the Internet - that's why my Part Time Finance Director register is so important as it lists independent, experienced finance directors and how they can be contacted.
More often a business has "finance problems" an experienced finance specialist can fix but the business owner either:
- Doesn't recognise it as a finance problem - what looks like a sales problem may be a finance problem because the business doesn't know what products it should be selling to get a good profit so wastes resources and gets less - this is an efficiency problem because outputs (profit) is not a high enough ratio to inputs (sales and marketing costs).
- Doesn't know there is a solution - the business can't afford a full time experienced accountant and the accountancy practice is both expensive and out of their depth in much of what happens inside a business.
You see although the time is reduced, the role of the finance director is the same - to help the chief executive / managing director / owner to manage the future for more profit and cashflow and to make sure the business is both effective and efficient.
The Solution Of Working With A Part Time Finance Director
A growing number of qualified accountants, with plenty of senior management experience in industry and commerce have started their own businesses as part time finance directors.
It's an in-between role for companies who want more finance advice than they get from their accountancy practice who do the tax and year end accounts but who can't afford a full time FD.
- Companies that are growing - time commitment can grow from two days a month to eight or ten days as the business grows. At that stage a business should be thinking about moving to a full time person and taking away more of the administrative burden on the entrepreneur.
- Companies that are getting smaller - a company with 250 employees needs a good FD, one with 100 employees probably, one with 50 employees maybe depending on the complexity of the business and the involvement of the FD in the commercial operations. As the numbers get smaller the role of the finance director gets smaller but unless the FD moves to part time, the salary doesn't.
- Companies with 25 to 100 employees that are stable - at this size there is plenty to be gained from having a part time FD
What Are Your Thoughts On The Role Of The Finance Director?
I'm very interested to hear what you think and whether you agree with me that the finance director plays an essential role in the management of any sizeable business.
Please leave a comment below.
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