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How a Part Time Finance Director Can Help a Failing Business

The business environment will continually change and the role of the part time Finance Director must also change to meet the new demands of business.

Whilst it is only recently that employing a part time Finance Director has come more into vogue that in itself reflects the changing needs of business. The part time Finance Director is expected to be more than a keeper of accounts but also to be an integral part of the management team contributing to the success of the business, much as a full time finance director would.

Typically this may include active participation in planning, strategy development, fund raising, management information systems, quality management systems, preparing for exit, training and so on and will afford the part time finance director the opportunity of working with his/her peers on making good informed decisions that will improve business performance and profitability.

For the owner of a troubled business without in-house financial expertise, a qualified part time finance director should provide the skill to help address the most common causes of business failure, particularly when the business owner is too involved with daily problems to objectively recognize that the business may have entered a period of potential terminal decline.

What are the common characteristics of business failure? How can a part time Financial Director help? Some businesses fail due to exceptional circumstances, however, the more frequently found causes of failure include: – No expert help readily available to advise the business owner.

The owner may have previously resisted appointing a mentor or part time finance director, consequently the owner’s skill set may be inadequate to address the problems of the business and a deteriorating business position may become exacerbated. A ‘problem denial’ phase may be experienced, however, it is rarely recognized that the cost of being proactive is far less than the cost of re-acting to problems.-

Debtors are slow in making payments.
Good cash management is jeopardized and the business owner must devote more time to cash collection activities or the risk of bad debts will become real.-

High staff turnover. If good staff cannot be retained operational costs will increase and the lack of work continuity may adversely impact the business performance. Should the reason for high staff turnover not be fully understood by the owner, the trend should be taken as an indicator that areas for improvement exist within the organization.- Lost customer accounts. If customer accounts are lost and the reasons why are not established and corrective action taken, the business will suffer a continual downward trend. Often losing a customer is viewed as an expected event.-

Selling price pressure.

Competitive pressure on selling prices will always be evident, however, the business may fail to demonstrate the uniqueness of its proposition and consequently be only able to sell on price. In such circumstances the business must reduce its cost base to compensate for the lost revenue or suffer decline; thus reducing the value of the business.-

Reluctance to change – lack of skills. The present technological based environment in which businesses operate dictates that the owner must keep abreast of new technologies and train staff to meet new challenges. Often there is inadequate training of staff and a reluctance to acquire external expert skills that lead to long term concerns. -

Poor management of Working Capital. In addition to increasing debtors, inadequate control of inventory and other current assets will increase costs of the business and reduce the liquidity of the organization.- Business growing too fast.

Fast growth in business may create a dangerous situation unless adequate liquidity and skills are present within the business to be able to discharge all increased commitments efficiently. Often the business owner fails to understand the interdependencies between the functions within the business. Rapid sales growth, unless managed and all business functions adequately resourced to meet the increase, may potentially cause failure in the business.

The qualified part time finance director will be able to work with the business owner and contribute in:- taking a proactive approach in the management of the business- evaluating the business risks- taking responsibility for the preparation of management information
- and taking informed decisions based upon fact.

The role of the Part time Finance Director will vary in different environments, however, the import and expectation that the incumbent is keeping abreast of changing legislation and management trends, enhancing the appropriate skill sets of staff and is an active team player will be of great importance.

The business owner can now be comforted that professional accounting bodies mandate that members do carry out an ongoing programme of Continual Professional Development (CPD), which helps the qualified part time finance director to meet the needs and expectations of the business owner and further enhances the value of the part time Finance Director within small and medium sized organizations.

The Benefits of a Part Time Finance Director

The position of Finance Director (FD) in business is generally held in high esteem and in many instances the role is considered to be second to the Chairman/Managing Director.

The position affords the incumbent the opportunity to become actively involved in all aspects of the business in order to facilitate good planning and reporting practices. On occasions this high level cross-functional activity may not be enjoyed or even welcomed by the Finance Director’s peers.

Whilst it would be expected that larger organizations would appoint a full-time Finance Director, there are many reasons why such an individual may not be employed by many small and medium sized businesses.

There are situations that are most suited for engaging a Finance Director and these include:

The owner losing control of the business – not knowing how the business is performing – no management accounts – no cash management
Rapid business growth without a senior financial professional to assist in setting a robust strategy and plan for the future
Businesses that absorb all available cash with increases in working capital potentially restricting growth and capital expenditure.
Established businesses with poor profitability and/or with an unacceptable cash generative history.
Businesses facing external pressures to make financial improvements to satisfy personal or corporate commitments from banks or investors.
Business owners that plan to exit and seek help to maximize the business value.
In the above situations the small business owner may gravitate back to the work with which he/she is most comfortable or to the work that is necessary to meet the immediate business demands. This action is taken at a time when the business may be becoming more complex, undergoing change and potentially be at greater risk of failure. In such circumstances the services of a Financial Director are essential to maintain the good management and success of the business. Affordability is one key reason why a full-time Finance Director may not be employed in the small business. However, the cost of a full-time FD may be prohibitive but it does not eliminate the need for a person to fill the role. In addition there may not be sufficient work to actively engage a full-time finance director, what then are the options?
Consider the appointment of a Part Time Finance Director.

An increasing trend amongst small and medium sized business owners is to appoint a Part time Finance Director, albeit the person may not be formally appointed to the board – thus becoming a virtual FD.

The part time FD will only work sufficient time to discharge the commitments of the position; this then represents a significant saving against employing a full time person. Typically one to three days each week would be worked which would be a cost effective solution for the small and medium sized business owner.

Would the role of the part-time Finance Director differ from that of a full time person? No, the responsibilities of the position; be it part-time or full-time would be the same; only the time worked would be different.

The part time FD would become conversant with the business, take responsibility for accounting, cash management and advise and report on the financial performance of the business.

However, a virtual or part time Finance Director would provide several advantages including:

Containing costs. The financial skills required in the business would only used when the business needs them.
Usually experienced in different business sectors and different sizes of business. This would provide the opportunity for the part time FD to transfer the skills, best practices and knowledge gained in one industry to another.
Offering the business owner unbiased and independent opinions.
Freeing-up management time to enable other specialist functional directors to concentrate their work in areas most beneficial to the business.
Providing input into the strategic decision making process.
Advising on general business matters.
Adding credibility of the business to third parties, particularly banks, finance providers and other professionals.
Consulting with auditors, solicitors and other professionals on behalf of the business.
Ensuring good management and accounting practices are implemented and compliance with statutory requirements.
What traits should the part time Financial Director possess? It will be important for the business owner to be able to work with and trust his part time FD. In addition the Finance Director should demonstrate an interest in the business and be willing and able to transfer his knowledge and skill into the business. The part time Finance Director should become an integral part of the management team and take responsibility for and be accountable for his/her actions and at all times act professionally.

The Role of the Flexible Finance Director

Not all businesses have Finance Directors, and there is a common attitude that only large, enterprise level companies need them – and afford them. However, many growth businesses need help from a finance director before reaching enterprise level, understanding the role of a financial director can be the first step towards gaining the expertise of an individual that can literally make the difference between the success or failure of a business.

The primary functions of a financial director can be summed up in six points:

1.Finance Directors are responsible for managing the finance function of the business which would include overseeing such things as transaction recording, cash flow management, internal controls management and statutory reporting, finance department personnel management and development , external auditors and tax advisors.

2.The FD manages the financial and business planning of the business, including budgets, forecasts, strategic business reviews, financial strategy, cash and finance requirements and formal business plans that can be presented to third parties such as potential investors.

3.FDs manage relationships with important external interested parties including funders, bankers, outside investors, solicitors and corporate financiers as well as the aforementioned auditors and tax advisors

4.A finance director with a commercial business background is often able to contribute to and manage functions such as IT systems, legal, HR, property and other facilities. Special projects such as mergers and acquisitions and internal change management are also often handled by the finance director.

5.The FD will be the numbers interpreter and translator. A good Financial Director will not only produce good quality numbers using sound and robust systems and processes but will be able to describe what the numbers mean. Furthermore, this interpretation encompasses not only what has happened but what might happen in the future, using indicators and key metrics. The translation of numbers into facts on the ground is probably the main differentiator that a good Finance Director has over a good financial controller.

6.Finally, but crucially, the FD is perfectly placed to be the business number two to the MD, the ideal business partner, devil’s advocate, conscience, voice of sanity and where occasionally necessary, the brake. A good FD can talk finance to finance people as well as present finance issues affecting the day-to-day running of the business in a clear and concise way to the management team.

It might be logical to conclude that with all of these responsibilities, a Finance Director is a full time role required by bigger companies. However, more and more businesses are discovering that there is a crucial period in the life of a growing business where the skills and experience that can deliver the above services are required, but not on a full-time basis, and that a flexible Finance Director is a low risk, cost-effective bridge between using a bookkeeper/accountant combination and acquiring that first full-time FD.

What is a “flexible” Finance Director?

A flexible, or part-time FD does just about anything one would expect a permanent Finance Director to do, as long as it’s not illegal, unethical or immoral! Some clients have just a bookkeeper, others have a financial controller leading a finance team and the flexible finance director adapts to the resources of the client.

Generally, flexible Finance Directors work on an on-going basis with clients on projects of strategic value but are also happy to oversee the finance function in all its entirety.

Moreover, a flexible FD doesn’t go native as they are not working within the company full time. The main advantage this gives is the ability to retain an external perspective on issues. This can be very important when management teams in SMEs are often very overworked and do not have quality time to stand back from issues to see them in a fresh light.

Lastly, having a flexible FD model enables growing businesses to afford that critical expertise at a fraction of the cost of a full-time Finance Director.

The Best Car Insurance Rates

If your car insurance is due for renewal and you are considering buying another policy then this article will provide you with important facts that you should know about. Car insurance policies are getting increasingly expensive and you should do all that you can to reduce your costs. How much you have to pay for your car insurance is dictated by a variety of factors as they apply to you and your vehicle.

In this article we will examine coverage limits, your age, gender and marital status, your location and insuring other household members. All of these factors will have a great influence on how much you will have to pay for your policy.

Coverage limits are generally dictated by the price that you are willing to pay for your insurance. A higher level of coverage will generally result in higher premiums. The best way to find a good value policy is to comparison shop. Nowadays it is generally accepted that the best way to do this is by using a car insurance comparison website.

Your age, gender and marital status will have a great effect on the auto insurance rates that you are offered. Insurers rate drivers using a variety of criteria, if you are a young single male driver you will usually have to pay higher rates. If you are a middle-aged female married driver then your rates will be lower. Insurers calculate the best car insurance rates for you by comparing levels of risk. Those groups which are statistically more likely to be involved in an accident have to pay correspondingly higher rates.

Location plays an important part in deciding how much your premiums will cost. Drivers who live in an urban environment will usually pay more than those from a rural area. This is because drivers who live in cities and heavily populated areas are more likely to be involved in an accident, or to have their car stolen or vandalized. Insurers generally offer better rates if you’re able to demonstrate that you keep your vehicle in a garage at night. You may also be able to improve the security arrangements of your automobile by fitting an alarm, immobilizer and steering wheel lock.

Insuring other household members will have an influence on the cost of your policy and the best car insurance rates that you offered. If you have teenage family members living with you and they are added to your policy, then your costs will increase. This may still work out cheaper than if your teenage driver were to have a separate policy in their own name.

In conclusion, there are a variety of different factors which can affect your ability to be offered the best insurance rates. Some of these are coverage limits, how old you are, whether you are male or female and whether you are married or single. Your rates will also be affected by the area where you live and whether other household members are included in your policy.