Asoka is an Independent Finance Director and Management Consultant based in London. He works with growing companies as their part time Finance Director and is the Founder of AKCA Consulting, which helps companies improve their financial health.
An experienced finance director can add significant value to your business from day one and help maximise the value of your business.
Lack of financial management can destroy a company pretty fast, however good the product or service is.
Here are 5 critical signs that you need to hire a Finance Director/CFO even if it is on a part-time basis to start with.
1. Lack of timely accounts and management information
Management information and accounts are essential in a business and these should be produced as fast as possible after the month end, otherwise the information is already outdated and useless. A good finance director can ensure that the appropriate Key Performance Indicators are set up and that the relevant trends and issues are brought to the attention of the management in timely and accurate monthly management accounts.
2. Cashflow problems
Recurring cash flow issues are an indication that the business is not focussed on managing its finances professionally and sends bad signals to both customers and suppliers. One of the first things for a finance director to put right is to set up regular cashflow forecasts so that cash flows can be managed and business growth not affected. With a FD on board, your cashflows should start to improve.
3. Profitability problems
A good finance director can work out the most profitable areas and customers of your business, which may surprise you. Usually, business owners take this for granted and think the largest customers are the best for the business. Focussing on what is most profitable and by looking at pricing, a FD can improve company profitability.
4. Lack of a formal Business Plan
When a business needs funding as fast growth businesses usually do, whomever you seek funding from, either the Bank Manager or an Investor will ask for a Business Plan with Profit & Loss, Cashflow and Balance Sheet projections. Usually they will want a summary with these key projections attached on a spreadsheet. A seasoned FD can focus the management on producing a commercial and well written Business Plan and also should be adept at handling Banks and Investors. Successful funding is a long-term effort and getting the professional input of a finance director is critical and having a FD on board will also comfort any Banker or Investor.
5. Exit Planning
When you realise that at some stage you want to sell the business or at least part of it, having an experienced finance director along side you will help maximise the value of the business. There will be an endless jargon of terms used by Investors and a FD can cut through all that to make this as painless a process as possible.
Ideally, it should be through a recommendation and it could be from one of your management team who have worked with a FD or your bank, accountant, lawyer or Investors could recommend someone.
The cost of a full-time FD is always an issue when a business is smaller but there are very good part-time finance directors who have several companies they act for, so this a good way to start to get the financial management input on board for the cost of a few days a month.
The cost will always be more than compensated for by the improvement in profits and you will also have a strategic thinker on board to help manage the business into the future.
Related: 5 Key Tips On Hiring Your Top Team