What is the real purpose of a Finance team?

One of the questions we often get asked by SME business owners is ‘what’s the purpose of a finance team’ as they grapple with what they should be expecting from a CFO and finance professionals. 

Paul Lenton, one of our fractional CFOs with extensive media and tech experience, works closely with companies who want to grow and scale up. He provides a valuable insight into what a business owner should be expecting from his finance team.

“When I first speak to clients quite often the response is primarily to pay salaries and to pay the bills, and to provide some management accounts as part of a formal reporting process - and that’s a hoop that needs to be jumped through just because that is what Finance people do!  The management accounts will usually be produced around the 15-18th of the month following month end, and probably be discussed at a senior management meeting to review the month where the conversations go along the lines of “…sales are up 2%, cost of goods are down 1%, marketing spend was high because John went on a SEO training course”.

However, larger PLC organisations and smaller private equity owned businesses have a very different perspective on the importance of financial information. Results are expected exceedingly quickly, usually by day 2 or 3 after month close, and the information is geared towards insightful data that can be used for immediate action and response across the business- often produced in a graphic visual format that is easy for management to interpret. In this way, financial information and Key Performance Indicators (KPIs) become a catalyst for debate, management action and an ability to respond quickly to trends or issues.

I often hear management teams saying that everything has been fine so far using gut instinct and being “close to the coalface “, so why change. Well, the big iceberg looming ahead is that the chances of recession are extremely high; spend patterns of consumers and businesses are adapting very quickly to high inflation and increasing uncertainty, and your business needs to become far nimbler and responsive based on real measurable data.

Speak to many finance teams about closing a month end and reporting on a substantial amount of data with focus and clarity, within two to three working days - and the usual response is that it is impossible, completely mad!

But, this is where a highly experienced CFO/ FD brings their experience to the table and makes a real difference to the company. They have the knowledge on:

• how to structure accounting processes and work-flows so that it can be achieved quickly and without large scale disruption to the business operations
• ensuring finance teams have the right skill base and aptitude towards delivering messages, not just data
• how to focus on some key metrics which can add value to the various departments across the business (sales, manufacturing, stock control etc) so that decisive decisions can be made immediately and not 3 weeks after the problem could have been spotted 

This is just one aspect of a business overview that an experienced portfolio CFO can offer to the business.

Significantly improved reporting is one of the less glamourous aspects of what they can bring to the table. It is an important foundation stone though for a business that wants to consider itself as Premier League - and not 3rd Division, to ensure it can navigate through what might be an upcoming uncertain few years.

So if you’re a business owner with their eye on the prize then think about your finance function and whether an experienced CFO, like Paul, could help give you the insights you need to make your business more resilient during this economic uncertainty.”