Any MBA or business studies course will point out the importance of having a properly controlled and well disciplined accounting function. There have been many catalogued disasters where lack of this vital process has resulted in the ultimate demise of the largest of organisations let alone the new start-up.

But who is this colossus, on whose shoulders can be borne the weight of investors’ trust, with responsibility for accounting for the Sales Director’s complex deal, whilst massaging the CEO’s ego? Interestingly, apart from the odd Monty Python-like parody little time has been spent analysing what sort of person wants to become an FD and what makes a good one.  The starting point is to understand the origins of the typical FD.  80% of graduate Chartered Accountants come from a mathematical, accounting or scientific background - people who like definite answers to a problem. Many of these individuals ‘fell’ into accounting unable to decide what to do in life.  Accounting offered a safe option, good pay, good prospects, something one could succeed at, but still a qualification with so many options open. Our budding FD still didn’t need to decide what they really wanted to be when they grew up!

The best FDs I have met combine two other significant qualities. Firstly, they have the ability to picture the story behind the numbers, their favourite word is ‘because’. After every accounting fact the FD relays comes a ‘because’ statement. The second quality is the ability to communicate this picture in a way that everyone in an organisation can easily understand. An FD that resorts to complex jargon to explain a company’s performance doesn’t understand what is actually going on behind the numbers.

But surely these are the skills we associate more readily with a salesman or a marketeer. So are we looking at a problem solving, risk-averse salesman that does not quite know where they want to end up in life?  Well yes, and I believe this is why so many FDs make the transition from FD to CEO. In fact more than one in five FTSE 100 CEOs are accountants.  This may also explain why in SME companies so many FDs feel unfulfilled or worse, live in conflict with the rest of the management team.

This is often a more acute issue in Venture Capital (VC) backed companies. The VC, quite rightly, wants a solid controller of funds and someone with experience to manage the company’s finances from small to medium to large to exit.   However, the problems come in the length of time it may take for a company to become successful.

When spectacular growth occurs, no problem, but what if the market or product is not quite ready and there is a delay in execution? After a while our FD starts to become a little bored and in a vain effort to add value starts to become the salesperson or marketeer that they really wanted to be all along.  When these efforts fail, the FD becomes de-motivated and can no longer implement the strict financial and budgetary measures necessary in the same cheery and light-hearted way they once did. In short the FD gets in the way.

At Isosceles we have seen this issue on a regular basis.

Rarely is the person who is going to take the company public, deal with corporate financiers, investors and NOMADS, the same type of person who is going to produce management accounts, the forecast and weekly cash-flow when the budget doesn’t run to a financial controller as well.

We have had clients who have had as many as four full-time FDs in two years.  That’s four sets of recruitment fees, and four handovers.

This situation partly explains the rapid growth in  part time FD and outsourced FD services such as those Isosceles provides. The part time FD services have prospered not only because the client gets access to the higher FD skills they need in a cost effective way, but because the concept of running a portfolio of clients where the financial processing and controller elements are covered within one team has attracted excellent FDs.

So what is the solution when the FD does get in the way? Well, half an FD of course!

Mike O’Connell, CEO, Isosceles Finance

Independently those members of Isosceles personnel who are working on Sheffield related activities have all commented on how polite the people of Sheffield are. A recent email campaign resulted in an unprecedented number of replies – not necessarily positive, but replies nonetheless.   Similar campaigns ‘down South’ are at best ignored and at worst receive a verbal rebuke.

I am so glad we chose Sheffield for a second office.

Mike O’Connnell, CEO, Isosceles Finance

If you relate to one of the following, now would be the right time to outsource part or all of your finance and accounting function:

•  Rapidly growing or contracting businesses (quite often wanting to vary the costs of finance and accounting)
• You want a smaller highly focussed team concentrating 100% on developing great products and services and delivering these profitably – all the other clutter of business you want someone else to take care of.
• The business cannot afford a full-time Finance Director so the CEO is trying (and often failing) to fulfil this role – whilst also trying to grow the business
• Lack of, or poor quality, management finance and accounting information
• Experiencing high rates of staff turnover or skills shortage
• The business needs to generate operational efficiencies

Incidentally outsourcing doesn’t require firing existing staff and starting again, or binning the in-house finance systems.  At Isosceles we provide our service at our site or yours, on our web-based systems or yours, using your personnel and/or ours.  We also deliver a service tailored to each clients individual requirements – this is not a ‘one service fits all’.

If you didn’t receive a copy of Grant Thornton’s recent report What Makes and Outstanding Finance Director you should download it and read it. This is an excellent piece of thought provoking research which reveals that “today’s outstanding FD has emerged as a much more rounded, commercial business leader than his or her counterpart of 10 or 20 years ago.  He or she is a great communicator who can win the trust of colleages across the buisness and he or she is a partner to the CEO – very often a CEO-in-waiting”.

In my life time I have met some phenomenal finance directors, but also a good many average ones as well, and dare I say the odd one or two who should have made an alternative career choice!

But an ‘outstanding finance director’ is very difficult for an SME to be able to justify on a full time basis. Often in SME companies where a full time FD is in situ, they feel unfulfilled or worse, live in conflict with the rest of the management team?

This is often a more acute issue in Venture Capitalist (VC) backed companies.  The VC quite rightly wants a solid controller of funds and someone with experience to manage the company’s finances from small to medium to large to exit.  However, the problems comes in the length of time it may take for a company to become successful.

When the spectacular growth occurs, no problem, but what if the market or product is not quite ready yet and there is a delay in execution?  After a while our FD starts to become a little bored and in a vain effort to add value starts to become the salesperson or marketeer.   When these efforts fail, the FD becomes de-motivated and can no longer implement the strict financial and budgetary measures necessary in the same cheery and light-hearted way they once did.  In short the FD gets in the way.

We have had clients who have had as many as four full-time FDs in two years. That’s four sets of recruitment fees, and four handovers.

This situation partly explains the rapid growth in part-time finance director and interim finance director services.  These services have prospered not only because the client gets access to the higher finance director skills they need in a cost effective way, but because the concept of running a portfolio of clients where the financial processing and controller elements are covered within one team has attracted outstanding finance directors.

So when the FD gets in the way what is the solution?  Half an FD.

Part of the problem is that there is no real market leader in this space and companies are forced to do a lot of homework before making decisions – this is a daunting task.

We are so fed up that we have decided to try and save you some of that time. We have looked at the market leading professional services solutions and compared functionality – click here for your free PSA Summary.

The products evaluated range from simple web-based time capture, through fully functional project and staff planning systems, to integrated accounting and enterprise solutions. These systems are appropriate to companies ranging in size from a couple of consultants to 200+ with budgets to match.

As always delighted to help anyone who needs help.

Mike O’connell, CEO, Isosceles Finance

The truth is that if £2M results in a net amount saved of say £750K, a £3M sale results in an increase in amount saved of something like £1.6M more than double.  Holding on just a little bit longer can have a much more dramatic effect on wealth.

The other issue of course is that once the sale is concluded it isn’t the case that the entrepreneur sails off into the sunset.  The new acquirer will be squeezing the entrepreneur for the full value of their acquisition.

Our first time entrepreneur needs to take significant comfort from the fact that a potential acquirer has found them, that a credible offer has been made.  If it can happen once by accident it can surely happen again if planned for properly.  Selling a business is no different to selling your best product or service – it is best done through a considered campaign.  An entrepreneur who sells too early or too readily has plenty of time after to rue their decision.  Frustration may eventually drive our first time entrepreneur to do it all again – breaking all those promises made to partners and family – this too can have a dramatic effect on lives.

A second time entrepreneur now there’s a different story…..

Mike O’connell, CEO, Isosceles Finance

Perhaps an offer resulting in our entrepreneur making £2M is the one tempting enough to make that sale.  However in my experience of entrepreneurs who sell at this stage, what sounds like a large sum of money quickly depreciates.   For a start the agreed £2M isn’t all cash up front, the deal starts to spread it over 2-3 years.  Part of the proceeds are dependent on the performance of the business, part is put away in escrow.  Lawyer and accounting fees come along -  wow 5% is wiped off very quickly.  Then there is some tax to pay.

Before long our £2M becomes worth £1.5M net, still sounds a lot.  However, once the mortgage has been repaid or more likely a larger house purchased and that new car you promised yourself as a bonus for working so hard.  You may have done a little something for charity or other family members -  perhaps there is £750K left in the bank.   This is still a large sum isn’t it?  Invested properly you can make something like 5-10% a year.  However your lifestyle became more expensive also, you joined the golf club, you go on those more exclusive holidays -  skiing and a summer holiday.  You buy from the more expensive boutiques, after all you’ve earned it. 

Before very long you realise you need a job, you start on the treadmill again. 

At this point I should apologise, it is surely immoral to make an argument in a world still full of poverty that £2M is a small amount of money.  For anyone earning the national average salary please take consolation from the research that shows happiness does not increase once one earns about £10K more than the average wage – anyone can be as happy as our first time entrepreneur by working just a little bit harder or getting a little bit luckier.  However in the context of an entrepreneur who has potentially risked everything for the success of their business, the dream must be to one day sell the company and make enough to have to never work again or at least to work by choice rather than necessity.

The final instalment to follow soon.

 Mike O’connell, CEO, Isosceles Finance

Sure the management books tell us to plan 12-24 months in advance develop relationships with the companies that could become potential predators.  Raise your profile in the eyes of the predator; establish relationships, joint ventures, partnership agreements -  where your offerings are complimentary to the target predator, target the predator’s key customers or staff where you are competitive.  Run your business to maximise growth or profitability, whatever you think will be most attractive to your predator.

The truth is very few companies are able to plan like this.  Few first time entrepreneurs are bold enough to engage a banker to sell their business for them. 

A large number of transactions come out of the blue.  Our stressed and stretched first time entrepreneur is dealing with the latest major business challenge when an offer comes from a trade buyer with warning at all.

One of our clients was recently faced with such an issue.  Our entrepreneur will only sell his or her business once – one transaction that will have a profound effect on their life.  The business is likely to have gone through a number of cycles  -  one day all could be lost, the next the company could be the best thing since sliced bread.  It may have taken many years of blood sweat and tears before this business became viable.

So here comes the first credible offer for the business.  What should our entrepreneur do?  It is so tempting to cash in while the going is good.  A few million or several hundred thousand pounds would pay off the mortgage, pay the school fees, buy a new car or that place in Spain.  This represents a chance to take a breath of fresh air, take away the stress, start sleeping at night and do all the things your partner or children have been nagging you to do.  Perhaps the amount isn’t enough to never work again, but it beats losing everything in the next down turn – doesn’t it?

Parts 2 and 3 to follow shortly.

 Mike O’connell, CEO, Isosceles Finance

I am delighted that Isoscles have been announced as finalists for the Accountancy Age Award ‘Small Firm of the Year’.   This is  the third time we have been shortlisted for an Accountancy Age Award – I am REALLY hoping its third time lucky.

Our first nomination in 2008 recognised our significant investment in our state of the art service platform. Our second in 2009 celebrated the success and difference we brought to our clients. This year’s nomination acknowledges the exceptional quality of our people, the support we give them and how they have brought success to our clients. In a nut shell these nominations have recognised our people, processes and systems – our ingredients for enduring success and the reason our outsourced accounting and other are amongst the best available. Don’t just take my word for it talk to our clients.

 Mike O’connell, CEO, Isosceles Finance

There has been much speculation in the press over the last couple of weeks about a double dip recession.   Whilst no one can predict with certainty when, or indeed if, it will happen, one thing is for sure the likelihood has significantly increased.

I hope and pray, like you, that it doesn’t happen but I must prepare myself for the fact that it might.  I need to review and tweak my Plan B  – the one I wrote at the beginning of 2009 but thankfully didn’t need to execute!

‘Plan B’ encompasses many things for example: better cash management; better debtor management; identification of alternative sources of funding; cost reduction; labour force reduction.  In a ‘nut shell’ it identifies the creative ways of achieving more with less.

 I have prepared a paper to get you started 10 Things to Include in Your Plan B.  I must emphasise at this point though that just because you have a Plan B doesn’t mean you have to execute it – but never has the saying ‘better safe than sorry’ been more apt.

Invariably the development and execution of ‘Plan B’ is easier (less painful?) with expert help.  It’s not without its challenges but we have guided many businesses through difficult times. 

“The only thing harder than planning for an emergency is explaining why you didn’t” (Unknown)

 Mike O’connell, CEO, Isosceles Finance