The finance lead in any business has a key role to play and, as such, needs many skills to effectively perform the role.

Firstly, and most obviously, they need to be numerate and understand figures, ratios, key performance indicators (KPIs). A good test is whether they know the difference between ‘mark-up’ and ‘margin’!

They need to see the wood and the trees in that they need to see the big picture i.e., the big financial decisions that must be made, but also the day-to-day decisions, for example, managing daily cashflow.

A good finance lead will be able to cope with multiple issues or problems simultaneously; it is no good just concentrating on one issue while three others are left unresolved.

Delegation is key

The finance lead doesn’t have to do everything; rather they will need to retain their overview and effectively delegate to other members of the team. Delegating the right task to the right team member is a key skill.

Having delegated tasks, the finance lead will have to effectively manage the finance team. The team is likely to be under pressure (finance teams, in my experience, are often under-resourced) and it is vital that the team members feel supported and valued and are given tasks appropriate to their skill set.

I would say that a skill that is not at first apparent but probably the most important of all is the ability to stand up to the MD or the other leaders in the business. The finance lead is the financial conscience of the business, and it is vital that, for example, if the MD announces that a new widget will be produced then accurate and timely financial advice can be given.

Why does it matter?

Having a good finance lead in place matters because any business decision from the routine day-to-day to the strategic decisions about the future depend on quality financials. Do you have the funds to meet that VAT bill or do the financials stack up on the new division the business is looking to acquire?

Not managing the financials mean that incorrect or bad decisions can be taken, and opportunities not capitalised on.

It matters because the MD then has someone they can turn to, to give them the information they require at whatever time they need it. The MD is likely to be significantly time poor so a good finance lead can reduce this burden.”

Good versus average finance leaders

I have known two clients where one had a good finance lead in place and the other did not; I noticed the following differences in outcomes.

It took us, as the external accountant, a lot longer to produce credible year-end figures as we could not obtain the relevant information we needed on a timely basis

With the good finance lead, everyone in the team knew their role and worked together well. The team in the other business although hardworking was disorganised, undertook tasks that were not necessary and did not effectively work together.

On a monthly basis, the mediocre finance lead could not give his MD any meaningful financial information. This meant the MD did not know how much profit was being generated or what decisions he should be making.

By contrast the good finance lead produced a monthly management pack with key ratios, comparisons with previous periods, cash flows and an executive summary which could be digested easily.

The good finance lead kept on top of working capital, hence minimising debtors, keeping stock and work in progress under control. He ensured creditors were paid on an appropriate basis and anticipated larger bills (e.g., VAT and Corporation Tax) making sure there was adequate provision.

The mediocre finance lead had much looser controls and therefore it was a much more ‘hand to mouth’ basis which produced cash flow panics on several occasions.

Differences for larger businesses

The skills required will differ the larger the business gets; for one, there will be a bigger team in a larger business which requires more effective people management and delegation skills.

There would probably be greater complexity the bigger the business gets and as such the finance lead would be expected to have a greater financial knowledge and produce more formal reports, perhaps for the Board of Directors. They may even sit on the Board themselves.

With a smaller business, the MD may undertake various tasks themselves that in a larger business they would delegate to the finance lead, e.g., a risk management policy.

For more information, please contact me or your local Westcotts office.

Written by Patrick Tigwell

August 25, 2022

Category: Blog

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