In the boom times, it can be very tempting to seek out an FD who’ll add ‘a strategic dimension’ to the business. You see a lot of MBAs creeping into finance functions, and the specialist press starts running features about the emergence of the ‘financial chief operating officer’ and the demise of number-crunching.
Fundamentally however, even when a business is growing fast, what you really need at the helm of the finance function is someone who can keep a tight grip on the numbers. In particular, your FD has to be cash-obsessed, ensuring that working capital demands are kept under control and that the activities you think are profitable are really delivering to the bottom line.
We rarely get a brief asking for FDs with a degree in applied derivatives. Entrepreneurs need to partner with smart, disciplined, straight-talking finance directors who can channel your energy into real growth.
Doesn’t that all change in a recession? No. Working capital risk just shifts from over-trading to over-stocking, for example. The difference between survival and collapse is still solid cash management. Two years ago, you needed your accounts in pristine condition so you looked good during IPO due diligence. Today, the banks will use any reason not to lend – so confused or misleading accounts are still a major no-no.
That’s not to say you shouldn’t still be looking for a well-rounded FD. An accountant with no interpersonal skills and a permanent scowl is just as useless in a downturn as in the good times. So as well as strong technical skills and a clear sense of discipline, your FD should be a great communicator.
Actually, that’s vital in times like these. (Remember, this is the person who might be trying to prise an overdraft out of your banker. If he or she can’t tell your story well, you’re in trouble.)
You don’t want your FD to be a doom-monger, but you do want someone who’ll give you the unvarnished truth. You need a straight-talking, factual finance person who can give you a rounded view of the numbers – the upside and the downside – and who’ll ensure appropriate action is taken before the financials end up sinking the business. Clarity, openness and decisiveness are pure gold.
It’s also worth considering additional firepower in the finance function over the next 18 months or so. If your otherwise great FD has never been through a restructuring, refinancing or turnaround before, get help. The finance function can make or break a business when the going gets tough, and FDs who’ve been through those kind of near-death experiences know just what strings to pull and when.
Sarah Hunt is managing director of EquityFD and EquityFC www.equityfd.com