As a supplier of part time FD and interim FD services I am often faced with clients who are not entirely sure what an FD does, or why they should need one “I have a financial controller who is more than capable of knocking out a good, timely set of management accounts why do I need an FD, what do they add?”
Without doubt the role of the modern FD has changed, no longer are they expected to simply just ‘count beans’ or be a ‘safe pair of hands’.
So what exactly DOES an FD do? Firstly an FD can do nothing without management information. They must put in place the personnel, systems, controls and processes required to deliver the appropriate level of accounting information. The level of information needs to be appropriate for the size of the company, appropriate for the audience (management team, investors and staff). Appropriate to the budget of the company and where it is moving to in the future.
It is too easy for an accountant to hide behind a multi-tabbed spreadsheet or a thick management pack. Too often accountants bring the management pack they picked up from their previous employer and try to squeeze it into their current company with little regard as to whether this is appropriate.
I have a friend who is the FD of a FTSE100 company – until recently he didn’t have a computer on his desk. I was both horrified and amazed, but on reflection I was also rather jealous. With a beautifully designed and modelled spreadsheet the temptation to go straight into detail is high. I think I would be better served sometimes if I sat back and reflected on what I really needed to know for the business.
There are some CEO’s who do not fully understand their accounts but are comforted by a number of artistically crafted graphs and if there is a really thick management pack as well, then “someone must be delving into it and analysing stuff”, mustn’t they?
It is worth noting that often the FD’s best decisions (and sometimes worst!) is the selection of the accounting team. Team recruitment and development is often the area that the average accountant has the lowest level of skill and experience in. This is partly why our own Isosceles’ service has been so successful. Our FD’s are backed by an experienced team of accounts assistants, accountants and controllers, all tried and tested in difficult situations – battle hardened. We make it easy for the FD to look good!
There is nothing worse for an FD than an under-skilled, de-motivated team supporting them. The finance department needs to be built on solid foundations – standard controls and procedures performed regularly, reconciled, reviewed for variance and non-compliance. On top of this can be layered good standard reporting and on top of this can be layered advanced analysis and KPI identification. The FD must fashion and produce this department. They must be able to lead and motivate.
Mike O’Connell, CEO, Isosceles Finance
Next instalment – Role of the Finance Director Part II: Painting the Picture
