Last month, we touched upon the benefits of bringing a part-time finance director (FD) into your business if you don’t have a finance team and are struggling to take care of all the financial tasks yourself.
But what if you already have a finance function?
How can your FD work alongside your existing team – and add even more value to your current setup?
We explore the benefits and challenges of bringing an outsourced FD into the fold when you may already have established systems and processes in place for your finance operations.
Why might you need an FD?
You’d be forgiven for thinking that companies with dedicated finance departments have got all the company’s fiscal needs covered.
While this can be the case, much of the time, these businesses are not using their financial data to inform the strategic direction of the business.
They have a hold on their cashflow, they have little debt from creditors, and they make sure their management accounts are produced on time. However, they do not necessarily know what to do with all their financial data. They are often unsure how to interpret these numbers in order to create an accurate picture of their financial health, or how to use historical data to predict what’s around the corner.
In our view, there are three key reasons why you may want to consider bringing an outsourced finance director into your company, even if you already have staff who seem to be handling your finances for you.
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You’ll get clarity on what you can afford, and when
Do you have enough capital to invest in new talent? Could you really afford to make that new acquisition? Are you on track for growth, or are you at risk of falling short of your targets? An outsourced FD can help you answer all these questions, and many more.
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You’ll benefit from longer-term forecasts
Having an immediate grip on your finances is important. But your business will also benefit from developing 3- or 5- year forecasts that can help determine which direction the organisation needs to be moving in if it wants to meet its growth objectives.
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You’ll get out of the weeds, and into the strategy
As a business owner or executive, it’s all too easy to get pulled in a thousand different directions, which often leaves little time to look at the bigger picture. Additionally, you are very unlikely to ‘come up for air’ and consider your wider strategy if there is no one on board to hold you accountable.
Hiring a finance director will ensure that someone with the appropriate experience is always taking care of the financial side of things, even when your attention (and the attention of your board) needs to be elsewhere. It’s an effective way to drag your company out of the mire and create space for the kind of financial analysis and measurement that will enable your enterprise to grow consistently and sustainably. In short, it’s a proven way to future-proof your business, without burdening yourself with more responsibility.
Where will your FD sit within your business?
Firstly, we must break into this topic on the understanding that no two financial teams are the same. Every company, regardless of their size or industry, will do things slightly differently to the next – and that’s OK.
What is important, however, is that there must be a clear hierarchical structure to the company’s finance function, and each member of staff must have clearly defined roles.
Your outsourced finance director will be placed at the very top of the tree. They will usually sit on the board, perhaps even in the role of non-executive director, so they can collaborate directly with the rest of the C-suite and use their experience and expertise to directly influence (and improve) the company’s financial position.
They will usually meet with the rest of the board on a regular basis to share their updates and insights and help steer the committee towards making smarter and more financially sound decisions.
Understandably, changing the status quo in this way can ruffle a few feathers. But your FD should not be considered a ‘threat’ to your existing team. Instead, they should be thought of as someone who can enhance your current operations – and, perhaps, introduce more efficient processes that can save time, reduce admin, and shift the focus to using your financial data, not just collecting it.
Finance directors being brought in on an outsourced basis will have a lot of experience in managing and executing change within an organisation, so will have the skills needed to guide your team through the adjustment period.
They will also ensure that no one individual keeps too much knowledge to themselves; that they see themselves as a collaborator, rather than the ‘keeper of the money’. This helps to prevent much of the financial understanding exiting the business if and when an employee decides to move on.