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Managing the finance function through recession

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This is mainly as a result of banks still refusing to lend to small businesses despite the government’s pledge to back £1.3bn in loans and overdrafts. Consequently up to 36,000 small businesses are expected to close down this year, according to a recent statement from the business adviser BDO Stoy Hayward.

A classic conundrum for growing businesses is that with finance issues being so pressing, hiring a finance director for the first time could make the difference between success and failure. At the same time, however, this is not the market to be considering expensive new hires.

Everyone is aware that  one of the key impacts of the current economic climate for owner managed businesses is that as finance becomes increasingly difficult to access and the cost of raising finance continues to rise there is a real risk to survival. One solution can be to hire a part-time FD on a consultancy basis as they can add real value.

Minimising the impact of economic turbulence 

During the economic downturn, it is extremely important that the business owner receives timely and accurate management information to monitor the performance of the business as a whole and avoid making financial decisions based on an instinct rather than facts and figures.

Therefore, having the services of a finance director on a part-time basis, who can offer an all important steer and value for money, is more important than ever before. Identifying Key Performance Indicators (KPIs) for the business to help the board of directors understand what management information implies is one of the primary roles of a finance director. Identifying and interpreting margins and trends, introducing measures for better pricing, cost control, cashflow forecast and budgetary controls are all part of the value for money offering that a finance director should be able to bring to a business.

The services of a good part-time FD are not cheap and therefore it is essential that their time is spent on strategic matters and not carrying out routine accounts preparation tasks. Instead a good finance director would consider outsourcing day-to-day routine tasks to achieve operational efficiency gains.

A knowledgeable finance director looks at the business as a whole and not just the financial aspects. Survival of a business through turbulent times requires analysis of a business’s own activity and what is happening in the wider market and what impact this will have on financial results. This is where a part-time finance director can bring real value for money and help board of directors ensure business continuity and stability by taking the appropriate steps to minimise the impact of the economic climate and allow other directors to concentrate on their respective roles.

A winning team

Having a part-time finance director who can not only forge a relationship with the board of directors, but can also develop relationships with shareholders, banks and other stakeholders in the business can help develop a strong team. Aligning personal objectives of the business owners to corporate objectives and putting a plan together to achieve these can help to create a strong team in a testing climate.

Those businesses that can develop this coherency during difficult economic times can seriously cash in on the situation once the economic climate improves and the business is ready to move forward. Whether the business requirement at that time is to raise money through venture capitalists or via floatation on AIM or PLUS stock markets or evaluate organic vs acquisition strategy, a shrewd finance director will have a business plan ready to help your business have a smooth take off.

*Hammad Farooqi is the managing director of Azure GlobalRelated articlesHe’s dead tight but the right man to hold the purse stringsSainsbury’s Darren Shapland named Britain’s top finance directorTimpo on cost-cutting chaosPicture source

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