Water during drought: does your business need a part time financial director

A little while ago, a Johannesburg-based friend considered investing in a water storage unit. His desire was to install a tank in his garden to catch rain and thereby always have an emergency water supply. After looking at all his financial commitments for the month, he decided to hold off on that decision. Now, as the country endures several successive heatwaves and has moved into drought territory, he wishes that he had prioritised that spending. Instead, he is having to make do with less water and is forced to place all his hopes on the next downpour.

Sometimes our businesses face a similar scenario. No business owner wants to spend money unnecessarily, and our money can only go in so many directions. That means cutting down in some areas, but it also means recognizing where that spending would act as the proverbial water tank.

When it comes to hiring staff, it’s difficult to make that call. The natural inclination is to have as few staff members to get the work done as possible. But when it comes to financial management, outlaying extra money for an added level of expertise can sometimes be the most prudent option.

For example, if your company has a full time financial manager on board, you may well feel like you’ve got your bases covered. After all, you’ve got someone overseeing your planning, your company budgeting, and preparing management reports to track your financial performance. But there are instances when you might need the input of a higher level of financial management. At these times, we recommend you bring on a part time financial director. Here are some examples of why a part time financial director might act as the ‘water tank’ to your business:

• A part time financial director can help improve margins. Your part time financial director has the experience and skillset to analyze your business processes and identify how to drive down costs and drive up margins. He or she will recommend the necessary changes and then oversee the planning process to ensure they take place.

• A part time financial director can help you effectively manage your working capital. If you know you can afford to undertake a new project, but are worried about the cash flow to fund it, then you could do with the expertise of a part time financial director. They will structure your cash flow in such a way that you are able to meet your short-term debt obligations and operating expenses while freeing up as much as possible for you to pursue your other aims.

• A part time financial director can provide financial forecasting, financial modelling, and scenario planning. If you’re trying to decide whether or not to take that big leap, bring in some strategic input to help you make the decision. Your part time financial director can give you an idea of what the future might like look, help you develop a financial model along which to guide your decisions going forward or provide a real-life sketch of the probabilities of various outcomes. A good professional should be a trusted confidante and sounding board; someone to give you the confidence to go ahead with good decisions and help steer you timeously away from bad ones.

• A part time financial director helps you assess risks before you take them, and mitigate risks when you have. They’re trained to pinpoint financial risk: whether it be institutional, environmental or internal. Once they’ve identified the risks ahead, they can help you know how best to avoid or overcome them. They’re there to smooth the bumps on your ride, and guide you towards an alternate route when a so-called road closure looms ahead.

A good financial manager plays a vital role in overseeing and controlling the company’s finances. But bringing on a part time financial director when mapping out your strategy, seeking for ways to be more profitable or contemplating risky decisions can often provide you with financial water in times of drought. Speak to The Finance Team to find out more about how someone can provide you with the high-level interim or ad hoc financial expertise that your company needs.