Bookkeeper v FD v FC

I was recently talking to a prospective client about what is the right financial operating model for their business. They are a relatively new (less than 3 years old) and growing business that has so far relied on the book-keeping services of a local accountancy firm and an outsourced financial analyst. Responsibilities are confused and no-one has an overall view or a roadmap for scaling.

A well-structured financial operation is so important, and its design changes as a business grows.

When starting out, a bookkeeper is usually enough. A good bookkeeper is an expert at keeping the cash flowing – they record the daily transactions, invoice clients and chase payment and manage suppliers and recommend payment runs. They are great at the hygiene, and there is always a role for someone like this in an SME. They are usually part-qualified or just very experienced.

Once a business gets larger more financial expertise is needed. A Financial Controller or Manager is needed when the monthly reporting of results becomes critical, when assumptions and estimates are needed to produce financial information and more forward-looking reporting around cashflow and budgets/forecasts are needed. A Financial Controller should be a qualified ACA or ACCA accountant, with the technical knowledge to ensure that the critical financial information is being provided.

A Finance Director brings a higher level of expertise. They bring board level responsibility for the finances and an understanding of the strategy and how finance can support it. They can future-proof the business by building a roadmap that ensures the finance function grows with the business, helping with funding and investments (through connections and an understanding of the information needed for such transactions) and they bring governance and risk management expertise, increasingly critical as a business moves from small to medium.

Of course, the Finance Director doesn’t need to be full-time, and many SMEs don’t need a full-time FD – a fractional FD can do all of this and boost the potential of the business quickly.