Your financial director is the gatekeeper to your company’s finances and ultimately (arguably) the success of your business. The position carries huge responsibilities, as the financial director has to wear many hats within an organisation. Their role is largely misunderstood.
The common misperception is that the financial director handles cash flows and makes sure that employees get paid and accounts are settled timeously. Whilst this is true, the financial director role is far more strategic than that. They are the custodians of the business, not only dealing with the company finances but the overall health of the business. They are able to analyse financial data quickly and accurately, so as to make recommendations to company leadership on programmes that are working and those which are not. All too often, company leaders do not capitalise on the knowledge and expertise of an experienced financial director. FDs have a wealth of experience to draw from and can add serious value in areas such as (certainly not exhaustive):
- shortening your cash conversion cycle.
- accurate and insightful financial reporting.
- adapting and revising strategy.
- improvement of processes, policies and controls.
- creating realistic and accurate budgets and forecasts.
- Improved tax efficiencies.
As a company director or CEO, you need to question your financial director on the best way to adapt to economic trends whilst still ensuring that your business is a profitable one. Put into context, I am not saying that you must second guess your FD, on the contrary, I am saying question your FD so that he / she guides and advises you on company performance and future growth. Asking good questions, and doing so often, opens management and employees up to new ideas and possibilities.
The top 3 questions to ask your financial director:
For this we are quoting questions from leaders of top performing companies / institutions worldwide.
1. What counts that we are not counting? –Chip Conley, founder of Joie de Vivre Hospitality and head of global hospitality for Airbnb
Conley explains, “In any business, we measure cash flow, profitability, and a few other key metrics. But what are the tangible and intangible assets that we have no means of measuring, that truly differentiate our business? These may be things like the company’s reputation, employee engagement and the brand’s emotional resonance with people inside and outside the business.”
2. What information is critical to our organization that our executives are ignoring? – Max Bazerman, professor, Harvard Business School
“Focusing too tightly can cause you to miss critical information that’s right under your nose. Bad decisions can often be traced back to a failure to consider information that was readily available. If you are to be successful in business you need to take the blinkers off.”
3. Do we have bad profits? –Jonathan L. Byrnes, author and senior lecturer at MIT
Byrnes explains, “Some investments look attractive, but they also take the company’s capital and focus away from its main line of business. Bad profits may not necessarily be ones that lose money for your business, they could be the ones that offer a small percentage of return but can we use the money already invested in bad profits and re allocate it to investments and activities that will offer a better return and ensure company growth and profitability?”
There are an infinite number of questions that you can ask your financial director, but the quality of the answers to allof these questions lies in his / her capabilities and experience. If possible, engage an experienced, high level financial director that has had many years’ experience, across multiple industries. Whilst this is the ideal scenario, these high level FDs come at a huge cost and unfortunately companies that have the greatest need, often cannot afford to engage with them due to affordability and effective utilisation on a full time basis. There is a solution to this predicament. Companies such as the Finance Team outsource these high level FDs on a part time or interim basis.