To be a supplier of part time FD and interim FD services I'm often met with clients that are not entirely sure how much of an FD does, or why they will need one "I possess a financial controller that is in excess of effective at knocking out a very good, timely couple of management accounts so why do I needed an FD, what exactly do they add?"
Without doubt the role in the modern FD is different, will no longer are they most likely to really 'count beans' or perhaps be a 'safe list of hands'.
Just what exactly exactly DOES an FD do? Firstly an FD can do nothing without management information. That doctor needs to applied the personnel, systems, controls and operations necessary to provide you with the appropriate degree of accounting information. The amount of information needs to be suitable for the size of the company, right for the target audience (management team, investors and staff). Appropriate towards the budget in the company and where it truly is moving to later on.
It is actually too feasible for a los angeles accountant to disguise behind a multi-tabbed spreadsheet or a thick management pack. All too often accountants bring the management pack they found from other previous employer and try to squeeze it inside their current company with little regard whether or not it is appropriate.
I have a friend who is the FD on the FTSE 100 company - until recently he was missing a pc on his desk. I'm both horrified and amazed, but on reflection I'd been also rather jealous. That has a beautifully-crafted and modelled spreadsheet the temptation to search towards detail is high. I'm sure I would be much better served sometimes only sat back and reflected on what I seriously needed to know for that business.
There are a few CEO's who do not know their accounts but you are comforted by a number of artistically crafted graphs if there exists a really thick management pack likewise, then "someone should be delving in it and analysing stuff", mustn't they?
It is actually worth noting that frequently the FD's best decisions (and frequently worst!) would be the choice of the accounting team. Team recruitment and development is often the area that the average accountant has the lowest level of skill and experience of. This really is partly why our Isosceles' service has been so successful. Our FD's are backed by a highly skilled team of accounts assistants, accountants and controllers, all tried and tested in difficult situations - battle hardened. We permit the FD to look great!
Nothing is worse on an FD than an under-skilled, de-motivated team supporting them. The finance department should be built on solid foundations - standard controls and procedures performed regularly, reconciled, reviewed for variance and non-compliance. In addition can be layered good standard reporting and also on top of this is layered advanced analysis and KPI identification. The FD must fashion and produce this department. They should be capable to lead and motivate.
Painting the image
I could continue about controls, but in truth a bit of good financial controller must be in a position to put these in place.
A balance sheet is actually a static picture in a moment in time, it says neither than a company is doing well nor badly. Truly says at the present time we will potentially liquidate all our properties and investments at book value for X.
A profit and loss are the reason for one particular period would not provide enough information, concerning the performance of an company.
Every piece of analysis is actually a paint colour as well as the job from the Finance Director (FD/ CFO) is usually to make colours and paint a perception with the effectiveness on the company. It does seem surprising that I am equating just what mathematical output into terms which might be artistic, but this is just what the most beneficial FDs do. This runs specifically true of smaller organisations where company can be operating using incomplete data regarding the state of your market and competition.
The painting in the picture throughout the presentation of numbers and also the commentary will be the primary communication methods utilised by the FD. The opportunity to communicate is crucial.
Yet again the amount of communication required could vary from industry to industry. In creative industries the nature of the communication is crucial - the executives of an company tend to be addressing intangibles, they can be available of communicating messages and ideas and also this is when they wish to be communicated with.
Entrepreneurs usually have very short attention spans needed the common commercially available quickly and efficiently. They just don't need to wade through pages of analysis nor can they necessarily want to have the numbers pitched with spin. The cabability to have the ability to answer a straight blunt question by using a straight blunt fact is usually the most important.
In a manufacturing environment the executives are employed wading through quite massive amounts of analysis and variance. These are generally highly analytical people.
An FD must understand precisely what the information and communication needs of his management team are and adapt his/her message accordingly.
The Glue
An FD must be able to use the more knowledge about the business and use it to affect change while in the organisation, questioning the normal wisdom. The FD is required to be the 'critical friend' off regions of the business enterprise. Asking every manager to see the charge benefit equation of each and every division of expenditure or investment. The secret to success for the excellent FD is how to repeat this without interrupting business and without having affected ale this company to execute. Again communication is a key factor, the FD must be capable of frame why he/she is questioning the expenditure or investment in the higher quality , picture of your budget or plan.
The role in the FD is to bring the various components of the organization returning to the central plan, but have the capacity to see if your assumptions underlying the blueprint have changed and also model the modern scenarios and to affect the financial priorities.
From the most successful businesses that Concerning dealt with there was a healthy tension relating to the key business functions. Sales and marketing must be pushing the boundaries, service or product delivery has to be pushing the boundaries. Finance is required to be the flexible glue that holds these traits together and prevents them from fracturing.
This is often probably the most controversial role in the FD. You can actually get this perhaps the role wrong, to stray not in the FD's remit for situations to get political. I think this would be the last bit of the puzzle. Based upon the situation on the company, the FD must generate the to challenge another parts of the organization by delivering excellence within the 1st two parts of the FD role.
Mike O'Connell is CEO of Isosceles Finance. Isosceles can be a business accounting consultancy founded by Mike in 2001. Through work together with investors and early stage companies Mike realised that emerging and growing businesses need interim management provider a simple yet effective accounting function just as much as well known corporations. The battle these organisations face, however, is how to spend the money for caliber of staff and systems needed to make this happen grow and prosper.
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