Thought you might like to read my article published today in Outsource Magazine. Which “Shore” is the right “Shore” for the SME: onshore, nearshor or offshore?
Posts Tagged ‘Part time FD’
Onshore, nearshore or offshore?
Friday, January 6th, 2012The Part time FD – When Half is Better Than a Whole!
Tuesday, December 6th, 2011
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!
When is the RIGHT time to outsource accounting?
Tuesday, October 11th, 2011I am often asked “how will I know if outsourcing my finance and accounts is right for my business?” This question is akin to “how long is a piece of string?” – there are no hard and fast rules because of the variables of each individual business. There are however tangible business drivers and it will be one of these which, probably subconsciously, has provoked the questioner to ask this question in the first place.
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’.
Isosceles Opens Northern Office
Wednesday, October 5th, 2011
Dave Eaton, Manager Sheffield Office, with Claire and Aiysha
I am delighted that we have opened our second office, in the very welcoming city of Sheffield.
We have successfully supported over 100 ambitious companies from our South West London Head Office but we are now ready to implement the next stage of our growth strategy.
I haven’t used the term ‘welcoming’ lightly in my opening statement. I cannot thank Ann Allen and her team at CreativeSheffield enough for their welcome, guidance and the quality of their city briefing and information pack. They were without doubt instrumental in our choice of Sheffield.
If you are not familiar with CreativeSheffield, they are the city’s economic development function, funded by Sheffield City Council with business growth its core activity. Between 2008 and 2011, CreativeSheffield leveraged over £75 million of private sector investment and assisted in the creation and safeguarding of 5,000 jobs. Not bad eh?
Isosceles and The National Museum of Computing
Thursday, June 2nd, 2011I recently had the pleasure of visiting the National Museum of Computing, which is located within the campus of Bletchley Park – the Bletchley Park of the code breaking fame in the film Enigma.
There I had the pleasure of meeting Kevin Murrell , Stephen Flemming and Tony Sale together with other members of the team who had rebuilt Colossus - the world’s first programmable, digital computer. Colossus was designed to decode the highest level German ‘Lorenz’ codes much more complicated than those created by Enigma machines.
In today’s world of miniaturisation Colossus is unimaginable, for a start it’s the size of a large room. It is a beast of a machine, it clicks, whirs, flashes and growls like the flight deck of the starship enterprise. The paper tape carrying the code runs around wheels and cogs at 30 miles per hour, like a hamster on drugs on his wheel.
Surely never in Britain’s history – if not the world’s – has a computer had a more important job. Watching the machine in action it seems to process with a sense of urgency, you can almost hear it whispering to its German counterparts “I’m coming to get you, I’m going to crack you”. I’m sure any British member of the armed forces entering the room in the 1944 would have left the room confident that, with this snorting giant on their side, anything was possible.
The tour then took us through the ages of computing. It was fascinating to see the evolution and development of the things we take for granted today, such as the evolution of paper tape with holes to magnetic tape to huge circular storage disks to the small hard drives in today’s computers.
There were plenty of chances to reminisce (whatever age one harks from) - for me it was back to the ZX81, the BBC Acorn, early Apple Macs – computers which were the iPad of their day and which are still things of beauty.
I was amazed at how much progress this dedicated group of volunteers had achieved. There is so much to take in that one could fill many hours. It is also clear to see how much potential there is to further develop the museum.
InsightSoftware.com one of our fastest growing clients has been an important sponsor of the museum. It is very satisfying to see the money that they have donated being used so productively, I know InsightSoftware.com is very pleased with the progress
Isosceles is delighted to provide outsourced accounting support to the National Museum of Computing. It is especially appropriate that Isosceles, who have so many cutting edge technology clients, should now be supporting the place at the forefront of computing technology some 60 odd years ago.
Growing to America
Tuesday, May 24th, 2011I had the pleasure of attending the strategic sales meeting of one of our clients in Denver last week.
These guys and girls have an incredibly difficult task, they operate under a geographically distributed model. They operate in small teams that might see each other once a week, they may only come to the head office a few times a year. In addition they operate in an environment where they are often having to educate their customer as to why they have a problem and then sell them a solution with sometimes radically new software products.
I was amazed to see the level of entrepreneurialism within the team. Each sale person, presales and inside sales executive worked like a chess master to unpick the sales objections and shared ideas and strategies readily with their colleagues to come up with the optimum strategy. How much of the behaviour was driven by company culture or US culture and how much was driven by necessity is probably the stuff of books. Looked like the ingredients for a successful year from where I was sitting.
The Outstanding Finance Director
Thursday, April 7th, 2011Without doubt the role of the modern Finance Director has changed, no longer are they expected to simply just ‘count beans’ or be a ‘safe pair of hands’.
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.
10 Things To Include in Plan B
Tuesday, July 27th, 2010Previous blog Plan B
Here are 10 things to consider when developing ‘Plan B’
- Honestly and rationally assess where your product or service is in its lifecycle. Is it really a product fit for mass production and marketing or is it an early stage prototype requiring more investment? This will help prioritise resources.
- Define the core skills and processes required for the business at this stage. Do you need an expensive business development director if the product is still only a prototype. Likewise, do we need a fat development department if have with a mature product? Do I need a full time FD when a part time FD will suffice?
- Identify which members of the management team are appropriate for the business at this stage? Who are the fighters? Who can roll their sleeves up? Which members of the management team can perform multiple roles?
- Determine which one or two key markets have the lowest barrier to entry – i.e. where are you likely to get the easiest and earliest success? Investors often take more confidence from a small and growing pipeline rather than one or two big deals.
- Swift and decisive communication with staff is paramount. Staff usually know exactly what is going on within their company. They know sales are down, suppliers are complaining. They see the investors in the office. They will take confidence from knowing management understand the situation, are taking decisive action and are truthfully keeping everyone in the picture.
- Identify areas for cost cutting and cut costs as early as you can. Try to do it so deep that you do not need to repeat the activity. Don’t forget that management also need to be seen to make sacrifices not just the staff. Avoid extravagant demonstrations of spending in order to buy staff goodwill.
- Change the shape of sales deals. Get some cash up front or agree staged payments. Consider software rental, maintenance holidays, trade reduced maintenance for longer terms – be as light footed and as flexible as you can.
- Pay very special attention to cash flow and debt. Work hard to reduce your aged debt – incentivise your credit controller and sales people. Renegotiate with suppliers and debt providers for example agree staged payments with HMRC for PAYE. Get all allowances in early, e.g. R&D tax credit.
- Now may be a good time to collaborate. It takes a brave management team to actively seek out potentially competitor companies and strike up a relationship. Yes you may have to give up a little margin. But in times of crisis more imaginative ways of getting your product to market are required. Few companies are truly identical. Few have the same technical strengths, the same scale and geography of operation.
- Develop Plan B before you need it. Be clear on your KPIs (key performance indicators) and how you measure performance. Agree the point at which you will execute Plan B and stick to it.
Invariably the development and execution of ‘Plan B’ is easier (less painful?) with expert help. Isosceles have guided many small and medium companies through difficult times. It’s not without its challenges but with positive action at the right time, it is possible to shape your future!
Demanding Service
Wednesday, June 2nd, 2010As the generations pass we have become ever more demanding and exacting, especially when we are spending our own money. If we are buying a service we expect it to be fit for purpose and high quality. We expect a degree of expertise from our service provider. We expect a better job than if we did it ourselves.
If we engage a builder, plumber or decorator we find it is easy to generate an expectation of the result we want and to measure the output against this expectation. We can be a very exacting customer indeed. If we buy a product off the internet, we now spend hours reading reviews comparing prices and again make an exacting purchase – the best quality for the money we can afford.
I find it interesting to contrast this with how businesses generally measure the output of their employees. How many companies set out a detailed SLA for each employee? How many companies measure the performance each month against that SLA before they pay an individual’s salary?
In the world of accounting we may agonise before buying a software product for a few thousand pounds say to help with accounting or reporting, but if a Financial Controller spends a month building a spreadsheet do we really acknowledge that the model costs thousands. What about the ‘opportunity cost’ of what they should have been doing?
As an outsourced accounting services provider I find the process of defining an SLA and invoicing every month means that my customers ask themselves (and me) “What is the real cost of the finance department?” “What value has finance brought to my business during this month?” “Why did it take that length of time to deliver that task?” “Why did that activity cost that much?” “Are we monitoring and measuring the right things?” This level of scrutiny is a positive thing, in my opinion, it keeps our standards high and I genuinely feel that out outsourced accounting service gives a better value for money service than an in-house team where the monthly cost of finance has not been monitored for a long time and gets washed into the general bucket of all the other salaries.
Trials and Tribulations of the Venture Backed Turnaround – Part II
Tuesday, May 11th, 2010Continued ……….
Timing is becoming an ever more important factor in the success of a venture-backed business. The technology highway is littered with the road kill of fantastic technology that was too soon for the market – companies that perhaps burnt too much fuel too early and didn’t have enough to make it to the ultimate destination.
During these types of circumstances the venture capitalist backing a bleeding edge technology company then starts to get more and more involved in the day to day running of the business. Eventually the VC has a difficult decision, “do I bring in another investor and suffer severe dilution?” or “do I cut back to the bare bones, batten down the hatches and ride out the storm until the timing is right to then find passage to the new world?” The problem with the latter course of action is that in the acrimonious debate as to why the company hasn’t lived up to expectations and why the VC is limiting further investment quite often the original management team either bail out or are pushed out. Who will then steer this corporate boat?
The issue for the VC is that they have to steer the boat themselves or bring in a new team. If a new team is brought in, the new team appear like a hired gang of gun slingers – kicking over the bodies of the fallen trying to see where the treasure is buried. But why would the hired hands believe in the vision of a company which has failed once already? Why would a top class executive leave a top class job to take on this challenge? The truth is most won’t. The VC will have to find executives who are “out of a permanent role” who will “give it a go”. Therein lies the VC turnaround problem, the new interim management team are people who don’t believe in the product or the company and will give it a go until either they suffer a conversion and the company turns around or something else more permanent comes along. There is no passion or belief from the new management team only from the investor – the cart is very definitely before the horse.
In the meantime the VC has had to put in another round of funding to give the team some sort or running chance. The board room becomes an audience to phrases like “It’s not my money, but if it were I would do …………”. One of the most dangerous phrases in the board meetings I have found.
Mike O’connell, CEO, Isosceles Finance
To be continued ……….
