When should financial management become an important consideration?

If your company has reached a certain inflection point in terms of size, you’ve reached a time where the level of your financial leadership becomes a consideration. There is no set point at which this happens – it doesn’t happen when you reach a R10-million turnover, or profits of X amount per year. It has more to do with the volume of sales you’re making and the growth rate of the business. When things are starting to really move – when the business starts making its way up the arc of the J-curve – financial management starts becoming an important consideration.

When your company reaches this point, a few facts usually become applicable.

Fact one: Your company needs strategic financial leadership. Assigning a book-keeper to balance the books at the end of the month is no longer going to cut it. Ad hoc or reactive financial management will likely lead to failure or unnecessary losses for the company. You need someone with experience and insight to understand the risks you face, to pinpoint opportunities, to manage debt and optimize cash flow. You need the full functions of financial planning, organizing, leading and control in place.

Fact two: Your company’s cash flow cannot yet easily support an extra executive-level salary. You’re at the point that every penny counts. At your current growth rate, your company needs to plough all the money it can into operations and capital investment. You’re setting up structures, employing operational level staff members and opening new branches. While you need the strategic insight of a financial manager, you can scant afford to direct a sizeable amount of your monthly income towards paying one.

Fact three: Your company could meet its strategic needs and simultaneously save money by employing a part time financial manager.

The average salary package of a full time financial manager comprises the following:

Basic package: This includes the salary as we know it, the car allowance, cellphone allowance and any other salary perks.

Short term incentives: This includes incentives that are paid if the company or management team meets certain targets. They are generally paid out once a year and can include cash or shares that invest.

Long term incentives: These are paid out if the company meets targets agreed upon by the board, usually every three to five years. If the company meets a portion of the target, the executive will generally be awarded a portion of the incentive. Long term incentives often take the form of share options.

When contemplating the salary of a senior financial executive, don’t discount the additional cost of incentives. When taking on a full time financial manager, your company would be required to cover all these costs, typically meaning a seven-digit salary on a cost to company basis.

A part time financial manager, however, is paid on a much less complicated basis. Most part time financial managers are paid an all inclusive set rate, which includes all of the usually hidden costs of employment common to full time employment.

And then there are the hours worked. A full time financial manager is paid on the assumption that he or she works at least 40 hours per week. In contrast, a part time financial manager is paid for perhaps 2-3 days a week, meaning 16 to 24 hours instead of forty and is paid on actual hours worked and not assumed hours worked.

Looking at hourly costs alone, your company will save 40% to 60% on the salary of a part time financial manager per month.

A part time financial manager gives your company the direction it needs, ensures that you’re on the requisite strategic course for success and helps put effective systems and processes in place. At the same time your company only pays for the time they need to work and no more, you’re saved from the extra incentive costs of a fulltime employee, and you’re assured that your part time financial manager uses every moment that they’re on the job, productively.

Contact The Finance Team for financial executives who specialise as part time and interim financial managers. They can help your company reach its goals in this role.