The Finance Director is a key member of the senior management team that no organisation should be without. Working with the team, they will ensure that the organisation charts a successful course and avoids unnecessary risks. They will also put the right amount and type of funding in place.
However, choosing a good Finance Director can be a challenge. Here are some guidelines to ensure that the senior management team has the right financial and commercial support.
Finance Director is a commercial not a technical skill
As a grounding for being a good Finance Director, a recognised accounting qualification is the best starting point. This qualification will confirm the person understands accounting but it will not confirm they are a good Finance Director. So by all means choose a qualified accountant as your Finance Director but do not assume the qualification confirms them as a competent Finance Director!
Looking to the future not the past
There is a joke about accountants being able to tell you exactly where you have been but having little idea about how to help you get to where you want to be. This IS a stereo type but it does help to identify a key difference between an accountant and a good Finance Director.
Accountants have a mindset rooted in the past. They will often spend the majority of their time accumulating historic information to satisfy compliance returns for the government or historic reports for the management. They may see this as an end in itself.
A good Finance Director will insist those historic reporting requirements have been met. However, the use of that firm grip on the past is to enable the Finance Director’s understanding of the future.
A good Finance Director will have access to what was spent on stationery last month, but be a lot more interested in the size and shape of the sales pipeline for the next 4 quarters!
To be successful, a business will have a method for turning stock, people, IT, knowledge and other resources into sales and profit. This method is referred to here as a business model.
A good Finance Director will be extremely interested in your business model and will help to improve it. They will acquire a high level of understanding by working with the rest of the senior management.
Using this knowledge they will prepare forecasts and business plans as needed, to see how the plans for the next 12 to 36 months work from a financial view point. This activity will provide the organisation with the ability to monitor and understand the future and so maximise success.
In summary, a good Finance Director, in addition to overseeing the production of the accounts and ensuring the business is compliant for tax, will also have a thorough commercial grounding.
- Have a thorough understanding of the business from sales and marketing, through HR to operations
- Know why customers buy, what they buy and who the main customers are
- Expect to be challenged on finance matters and provide constructive and informed challenge to other directors
- Take a medium to long term view
If you have a good Finance Director in place, the senior management team will benefit from their input on planning and strategy – and will see the benefit and value that they add to the decision making process and the business.