Why your business needs a Finance Director

July 12th 2023 | Posted by Phil Scott

The owners and directors of many SMEs believe it’s not essential for their business to have a finance director (FD) in place.

The directors take on the role of developing financial strategy and control systems with the help of finance professionals such as bookkeepers and accountants.

The reasoning behind this approach is usually financial. SMEs often have a limited budget, and the directors believe that an FD is a luxury the business does not need. But is this actually the case?

Why the role of an FD cannot be done by anyone else

The role of an FD is both technical and strategic. It requires a combination of expert knowledge which other directors do not have. Financial matters that are specifically dealt with by FDs include:

  • Financial analysis and planning for the business
  • Presentation of monthly accounts and explanation of impacts on performance
  • Facilitating commercial decision making
  • Implementing financial processes and controls across the business
  • Ensuring the control of costs
  • Obtaining business funding
  • Creating and maintaining an effective finance function in the business
  • Leading finance-specific business projects
  • Providing expertise and reassurance during financial difficulties

Given the range of FD responsibilities it’s clear that SMEs benefit from the services of a qualified individual in the same way as larger organisations do. However, the cost implications of hiring a full-time FD may be prohibitive. When this is the case, a business has the option to use the services of an outsourced FD who works for them on a part-time basis.

The benefits of an outsourced FD

The most obvious benefit of working with an outsourced FD is the cost is less than hiring a full-time professional FD.  The professional works with the business and carries out all required FD duties. Taking this approach also provides the business with a level of flexibility concerning which services are needed and how often. Outsourced FDs often work remotely, so the business has access to specialised services no matter where it’s based.

The disadvantages of working with an outsourced FD are that the business does not have direct control and there may be hidden expenses involved. So, it’s essential to have a written agreement in place before any work starts.

As the business grows, it may also become apparent that a part-time FD is no longer sufficient. At this point, it makes sense for the business to reevaluate the situation and balance the cost of a full-time hire with the value of the full-time financial and strategic expertise necessary to drive the business forward.

Put simply, having the services of an FD is a valuable asset to an SME from a strategy, planning, and control point of view. Using an outsourced FD makes sense if an SME does not have the resources available to commit to a full-time hire. However, as the business grows, there may be a need for increased capacity in the FD role. At this point, it makes sense to reconsider hiring a full-time FD.

If you are a Finance Director or CFO looking for a new role, register with us. If you are an employer looking to hire an FD or CFO for your leadership team, contact us.