What does a Finance Director do?

The role of the FD is very different from that of the internal Financial Controller, Management Accountant or Bookkeeper, and also from the external Accountant.

The Financial Controller manages the day to day transactions for the company and ensures they are recorded accurately and that the company has sufficient procedures and controls in place to prevent loss. The Management Accountant presents the numbers and prepares the company’s forecasts and budgets.

In many small or medium businesses these roles are combined into one, or the company employs a bookkeeper, but what is common with all these roles is that their primary purpose is to record the business and deal with debtors and creditors; they present the numbers but do not normally interpret them.

The external accountant provides useful technical advice to many businesses assists with tax planning and ensures the company is compliant in all aspects of external disclosures. The external accountant is an ally to the business but is not able to spend sufficient time within the business to assist with setting and monitoring strategic goals and objectives.

The role of the Finance Director (FD) is much more strategic. Not only does the FD ensure the information being provided by the Financial Controller and Management Accountant is relevant and timely, the FD also interprets the information rather than just presenting it and in addition the FD will ensure systems and processes are optimised  in the most cost efficient way.

A fully effective FD is the ‘right hand man’ for the Managing Director/Chief Executive (MD). The MD is the strategic, forward thinking, creative force behind the company and its proposition, the person who sets the commercial objectives for the company. The FD role is to support the MD ensuring the future plans and direction of the company is financially viable. The FD works alongside all the other members of management ensuring plans are put in place to meet the objectives set and provides the financial underpinning to enable the business to delivers on these objectives. It is also common, particularly in small and medium sized businesses, for the FD to manage the ‘non core’ functions of the business such as IT and admin.

As a key member of the management team the FD should be aware of the key drivers across the whole business from sales to marketing, from operations to HR, it is only from understanding these key drivers that the FD can truly add value in establishing and managing the strategic direction of the company. 

The FD’s role is not a passive one it should challenge the views and opinions of others thus playing a key role in developing the plans and objectives of the company, the FD should have opinions on all aspects of the business from the pricing strategy to its distribution strategy, from its marketing plans to the company’s remuneration policy.

The FD fully understands the business and the data being presented, the FD can add value by helping the MD and the board understand key metrics and will know how to manage growth and when to assess the impact of weakened trading situations.

In times of growth the FD is invaluable particularly when the organisation is looking to seek investment, but also where the company needs to ensure its cash flow is managed smoothly ensuring working capital is available to fund growth. However the FD is also invaluable in times of contraction, recognising and advising on the need for control and working with the MD to maximise the results from limited resources whilst ensuring the viability of the organisation is an essential role.

A Finance Director is not ‘just a numbers person’ – they assist in strategy, business planning, understanding business drivers, setting relevant financial and commercial goals and objectives. If you employ the correct person the Finance Director is a worthwhile investment.