Q: When is an accountant not an accountant?
A: When he’s a finance director
Pretty much all finance directors (FD) are accountants. They will normally have a recognised accountancy qualification. On the other hand, not all accountants are FD’s. In terms of qualifications FD’s often also have MBA’s, industry specific qualifications or membership of directors’ institutes. Accountants are often regulatory, audit and tax compliance focused, working with historic data. For example, the preparation of statutory financial statements to be audited and filed months after year end. While an FD will analyse past data to identify trends and incorporate them when forecasting the future, the FD works with real time data (orders, sales and revenue forecasts for example) performing monthly analysis that need management’s attention sooner rather than later.
The FD looks to the future working across the business to build budgets, reforecasts and strategic five year plans, updating assumptions, in relation for example to sales mix, volume and gross margin % in order to predict worst, best and most likely scenarios on which management can base strategic decision making.
The FD will look to recent data to calculate product and client profitability in order to support management when determining future pricing and commercial campaigns. By drilling down on the profitability data, the FD identifies areas of underperformance and works with the business to identify solutions.
An FD’s commercial acumen adds credibility and gets results when negotiating with suppliers, clients, banks, landlords and local authorities. Anticipating the “what if?” questions can unlock an impasse in negotiations and avoid being blind-sided. The FD can provide the data to substantiate over-servicing in a client negotiation and the data to pinpoint the price at which management should leave the negotiating table.
The FD’s responsibilities will often extend beyond the accounts department. Overlap with HR is common as the FD is tasked with forecasting the salary line including scenarios for different percentage pay rise and hiring assumptions, calculating promotional salary bands and the viability of performance related pay plans. The FD will work in close collaboration with IT often leading system implementations and is responsible for the internal control environment that keeps critical data secure.
In recent years the term “finance business partner” has become closely associated with the role of the FD as he partners with leaders across the business in order to facilitate departments’ finance and analytical needs in line with agreed strategy. The FD also provides the monthly update of the “traffic light” dashboard of key performance indicators to assess alignment of business performance with strategic goals.
So, while all FD’s are accountants, their focus is adding strategic value to business management. For an SME weathering the post Covid19 storm the costly decision to hire a full time FD might not be an obvious one to make. A part time FD can provide a cost-effective solution adding strategic value by focusing on agreed business needs while providing direction to the accounts team to ensure the preparation of timely, relevant and actionable management information.
PwT Consulting provides part time and interim FD services to Island businesses
+44 7624 339 200