When a business is growing one of the most essential
requirements is to keep good control of the finances. Poor
cashflow can kill a business very quickly and having
someone who really understands the finances and how they
can work can save a company from disaster.
The challenge is that when a company is in the early or mid
stages of growth it generally can't afford a full time
Finance Director (FD) or CFO, even when it's needed. A
good FD or CFO is expensive because of the years of study,
training and experience they have to undertake to achieve
and maintain their qualification. They are also a scarce
resource and the good ones can make a huge difference to a
business.
So companies struggle through without anyone really looking
at their financial strategy and underlying financial
performance. They may bring in a bookkeeper or a firm of
accountants to keep their books and put together some
reports. However, more often than not, it's the CEO who
has to handle anything to do with raising finance, figuring
out commercial terms, dealing with investors, developing
business plans and models and handling banks. And that's a
big distraction for someone whose focus should be on
building, marketing and developing the business and leading
and motivating staff. And if they get it wrong, it could
spell the end for the company or the CEO.
When a company is growing there's often no need for a
full-time finance professional in the business and
companies that do bring in a heavyweight CFO or FD can find
that much of their time is spent on low value activities,
such as bookkeeping and admin. Alternatively, they start
to get involved in many other areas of the business or just
spend a lot of time sitting around waiting for something to
happen. This can be frustrating for them, as they're not
fully using their skills, and it's an expensive luxury for
the company that it can probably ill afford. And, with
salaries for a good, experienced CFO or FD easily into the
six figure range, and all the employment costs on top, it
often doesn't make good business sense to take someone on
full time.
More and more growing companies are recognising that using
a part time Finance Director or CFO in their business
provides a solution to these issues. There are a growing
number of companies in the market providing finance
professionals who work with companies anywhere from 1 to 4
days a month as their CFO or FD. This provides a flexible
solution to the needs of the company, allowing the CEO to
focus on their stronger areas and ensuring that the
finances of the company are being steered in the right
direction. By using just a few days each month it ensures
that the focus of the CFO/FD is on the right areas rather
than getting involved in anything that comes up. And the
good ones will tell you very clearly if they believe the
work can be done by someone for a lower cost.
Another advantage of having someone who's also working with
other businesses is that they can bring new insights into
your company and are less likely to fall into the "we've
tried that before" or "we don't do it that way" traps that
hamper many companies.
A part time CFO or FD will agree a plan of action for the
business and make sure that the fundamentals of strategy,
business planning, cash flow forecasting, financial
management and good commercial practices are applied. For
the CEO, they have a great sounding board and business
partner that they can turn to for advice, guidance or just
to bounce ideas off. For many CEOs the value of a having a
trusted advisor to hand hugely outweighs the costs.
The cost of a part time FD or CFO varies on their
experience, qualification and the level of work you need.
They are usually charged on a daily rate which is
equivalent to around 1% of the base salary for their level.
And when you consider that you don't have all the
employment and recruitment costs associated with an
employee (which can easily take the base cost up another
60%) and you only pay for the days you need, this can work
well for the business. Also, when you consider the value
that a good CFO can bring to a company, then you can easily
get a 10 to 20 times return on your investment and
considerably more peace of mind.
So, do part time FDs work for business? It will always
come down to the chemistry with the team and the experience
and training of the individual CFO/FD but the flexibility
and focus that they offer is proving to be a very
attractive proposition for many growing companies.
Investors are seeing the benefits of having a strong
financial presence in the company and CEOs welcome the
support that they provide, so it's certainly a field that
going to grow.
----------------------------------------------------
Andy Warren is the Managing Director of Marshall Keen Ltd.
He is a chartered accountant and successful CFO, FD and
entrepreneur with extensive experience in M&A, Corporate
Finance, Business Growth and Exit Strategies. Marshall
Keen http://www.marshallkeen.com specialises in providing
flexible CFO services and part time FD services to early
and mid stage businesses, particularly in the tech sector.
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