Do you need a Finance Director?

Should you consider taking on a finance director for your business? This is a question many growing businesses of all types often consider. If you have a bookkeeper or accountant, you may be wondering if you also need a finance director. In this article, we’ll take a close look at the roles and responsibilities that a finance director fulfils and help you decide if you need one.

What is a Finance Director?

A financial director is responsible for managing an organisation’s overall financial strategy. They analyse data from all relevant sources and departments, issue reports, and make recommendations. They are concerned with high-level financial decisions and activities of a business or other organisation.

The formal definition of a financial director specifies that such a person is a full board member who acts to further a company’s success without accepting benefits from third parties.

A financial director may carry out a wide range of responsibilities, including the following:

Managing Audits and Assurance

A financial director may need to perform and plan for audit and assurance engagements. Auditing involves a thorough examination of a company’s financial statements, while assurance engagements are conducted to assess the accuracy of financial reports and to ensure that proper accounting standards are met. A financial director will often advise stakeholders on the results of audit and assurance engagements in order to help the company develop more accurate and profitable procedures.

Filing Legal Documentation

Depending on the industry, a business may need to file a variety of legal and regulatory documents. UK businesses, for example, may need to file Annual Accounts a Confirmation Statement with Companies House, as well as convey changes in the business, such as owners, location, corporate structure, and any other details. A finance director will manage these and other important filings.

Monitoring Costs and Looking For Ways to Save

Every pound that is spent, whether on payroll, to pay suppliers, or for expenses such as utilities, affects the bottom line of a business. A finance director can identify ways to reduce costs. They may negotiate more favourable terms with suppliers or find suppliers that offer lower prices. They may research tools, services, and technology that help you automate tasks. They may analyse your pricing and suggest price increases.

Identifying Risks and Opportunities

Every business has challenges and risks, as well as opportunities for growth. Finance directors are trained to spot these and keep management informed. Risks may include competitors, changing market conditions, or new technology. Opportunities can include possibilities for expansion, opening new branches, or introducing new products and services.

Financial Director: Experience and Qualifications

While a finance director has functions that differ from an accountant, they must have a strong accounting background. They’ll often have accreditation with associations such as ICAEW (Institute of Chartered Accountants in England and Wales), CIMA (Chartered Institute of Management Accountants, or ACCA (Association of Chartered Certified Accountants).

Key skills a financial director should possess:

• Senior level accountancy.
• Strategic thinking to analyse the best financial decisions for a company based on constantly changing circumstances.
• Budgeting and forecasting.
• Familiar with the company’s financial condition and liquidity.
• Knowledge of financial markets and able to recommend investment programmes with a suitable ROI.
• Excellent verbal and communication skills. They will need to collect data and advise many stakeholders in an organisation as well as oversee finance staff.
• Familiarity with legal, professional, and ethical standards relevant to the business and industry.

Many people aren’t clear about how a bookkeeper, accountant, and finance director differ. While they are all involved in analysing finances, and their responsibilities often overlap,  they also perform distinct functions.

Bookkeepers perform many of a business’s daily financial tasks, such as billing, filing sales and purchase invoices, and sending payment reminders to clients.  In general, bookkeepers track the money coming in and out of a business.
Accountants are the next level in the hierarchy of financial tasks. They manage the information collected by the bookkeeper and review financial statements. They may conduct audits and make recommendations, as well as file tax forms on behalf of a business.

A finance manager oversees the financial tasks and data for a certain department or for the entire company. A finance director has a broader role than an accountant or finance manager. They will help guide the company’s long-term financial strategy. They are likely to analyse a business in relation to wider economic trends and competitors.

In practice, the functions of these three often overlap. In smaller businesses, a bookkeeper may handle all financial tasks. Mid-sized companies are more likely to employ an accountant as well as a bookkeeper. Finance directors are primarily found in larger organisations. This doesn’t mean, however, that smaller businesses can’t benefit from their contributions.

How to Decide if You Need a Finance Director

Does your business need a finance director? How can you decide? Don’t assume that you need to be a very large organisation, as even smaller businesses can benefit from someone in this role. While a finance director can help provide valuable skills and insights to a business, not every business needs one.

If your finances are under control, and you aren’t planning any imminent changes or expansions, your accountant may be able to handle all of your financial tasks and answer any questions. You may also consider alternative methods of obtaining business and financial advice, such as business coaching. If you’re wondering if your business could benefit from a finance director, ask yourself the following questions.

Do you need clarity in understanding your finances? You may need guidance on managing your expenses, complying with regulations, or understanding why your business isn’t as profitable as it should be.

Is there a communication gap between teams, departments, investors, or other stakeholders when it comes to financial matters? A financial director can help you create a unified strategy.

Are you finding it challenging to expand your company or to reach your full potential? A financial director can identify new strategies to help you achieve your objectives.

If you have any questions or need help deciding if you need a finance director, contact us today.