MT Expert - Finance: The art of the FD

Equity FD's Sarah Hunt reckons entrepreneurs need more than just an accountant.

Last Updated: 25 Feb 2016

As an entrepreneurial CEO you care about making a profit, of course, and there are probably one or two other metrics you might focus on. Payroll, perhaps. But if you start to fish around in the balance sheet, or try to explore the vagaries of accounting treatments, do your eyes start to glaze over? I wouldn’t be surprised! It’s not the job of the entrepreneur to care overly about that kind of thing. Your value to the business is passion, drive and organisational excellence. Accounts are for… well, for accountants.

But if you take the view that finance is just about getting the right numbers on the statutory accounts, you’re almost certainly ignoring a wealth of business acumen that a decent finance director can bring to a business. It doesn’t have to be overly technical: even at the most basic level, a good FD will ensure that an entrepreneurial team aren’t being ‘busy fools’. Too often we see growing, energetic companies where the passion is being channelled into a project deemed the Next Big Thing – even through its real profitability is zero, or, worse, it’s out of control and draining cash from the business. Certain projects, no matter how glamorous, will never deliver the kind of returns that will help the business grow or make it more valuable. It often takes a technical mind focused on the numbers, not the creativity, to see that.

It’s important to remember that an FD – as distinct from a book-keeper or a company accountant – comes with a bunch of experience, often drawn from outside the finance function. And these days they tend to be well-rounded individuals.  With most modern FDs, it’s about a sensible and valuable dose of reality, designed to help the business thrive and open new avenues of growth.

As a business expands, the organisational dimension gets more important. There comes a point when the way finances are structured becomes the most significant factor in determining the fate of the company. An FD is there to answer the critical questions: can you raise more cash to invest in new plant, staff, goods or marketing? How should you structure loans, and against which assets? What do you do if the bank gets cold feet about the overdraft? How do you organise the business to minimise tax exposure? Technical accounting also comes into play. An FD with an appreciation for the finer points of tax policy – or structuring contracts, or managing exchange rate risk, or outsourcing, or IT systems – brings with them a means of opening doors that would otherwise stay firmly shut.

I’d argue there’s one more dimension, too: strategy. Crunching the numbers – even in a sophisticated way that creates elbow-room for an entrepreneur to expand their empire – is unlikely to be the ultimate ambition for a finance director (If it is, they should probably have stuck to being an accountant). Yes, they have this kit-bag of technical skills. But because of the unique role that finance has in evaluating the whole business, they’re in a great position to offer advice on strategic directions that will get the company closer to its goals.

Number-crunchers debate whether accountancy is an art or a science. Like art, it’s open to interpretation. And it has disciplines, rules and technical components, like science. But it doesn’t have the richness of either discipline. In other words, it’s just a language – a way of describing your business. If all you want is a native speaker of this language, settle for an accountant. But with a good FD, you can actually get both an artist and a scientist in the same package. And you don’t need an accountant to tell you what a good deal that is.

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