Do I really need an FD?

My four-year-old £4m-turnover business is at the stage where I believe it could benefit from better financial advice, but could my accountants offer a similar service? How do I know if I really need an FD?


A. Stephen King of FDUK writes:

Large firms tend to have both a finance director and a firm of accountants. There’s a very good reason for this – they serve very different functions.

Broadly speaking, accountancy firms are full of technically excellent people, who are very good at auditing statutory accounts and advising on complex taxation matters. This technical expertise means that they can charge very high fees and are in great demand – it is not unusual for partners to have around 100 clients at any one time.

However, their focus on technical issues, lack of commercial experience and ‘mindset’ means that people working in firms of accountants tend not to make good FDs (those that want to be FDs leave, eager to roll their sleeves up and get on with building a business). A good FD will have spent years working in a commercial environment and will have picked up the essential tips and tricks necessary to overcome the many hurdles a growing business faces.

A firm of accountants will only ever be an external adviser; albeit an expert one that a good FD will turn to for complex taxation and technical accounting advice. In contrast, an FD, whether a full-time or part-time employee, will become part of the management team and will accept responsibility for the financial management of your business. The high level of financial management required to help a business survive and thrive can only be achieved from within the business.

You should never underestimate the importance of good financial management, but, unfortunately, many businesses do – only seeking help when there is a problem.

There are five questions that you should ask yourself. If the answer to any is yes, then you could probably benefit from an FD.

… Are you looking to develop a strategic business plan?

… Are you looking to raise funds for your business?

… Are you finding it difficult to ensure that your business increases its profitability?

… Do you need better quality management information to help you differentiate between a wise decision and a foolish one?

… Are you looking to exit your business or change its ownership structure?

Running a growing business is often a lonely job and it can be hard to find a reliable sounding board. As the article highlighted, taking on a part-time FD is a cost-effective way to get all the strategic advantages without the costs of taking on someone full-time.

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