How modern finance directors think - A new mindset for growth

Modern FD

Today, modern finance directors must think strategically and seek out new sources of funding as they plan for growth

Modern finance directors do far more than keep a close eye on the company’s balance sheet and profit and loss account. Increasingly they are working closely with the chief executive to develop the business’s strategy for future growth, and ensuring the company has firm financial foundations on which it can build such plans.

Take Bruce Besanko, the finance director of OfficeMax. “As CFO, I’m in a unique position within the organisation, at the absolute centre of the universe,” he says. “The only other executive besides me that has that same presence at the centre is the CEO."

As finance directors consider how to capitalise on the opportunities being created by the UK’s economic recovery, they must confront the question of how to finance their strategic ambitions in a climate where funding is not always easily accessible.

The changing nature of the finance director’s role

There was a time when finance directors were widely perceived as pure accountants. No longer: while finance directors still have a crucial role to play to ensure the business’s accounts stand up to examination, they must also work much more strategically, often hand-in-hand with the chief executive to develop the corporate strategy.

The result of this shift is that finance directors now need a much broader skill set than in the past. While they must still be excellent finance professionals, they also need to evolve their capabilities in areas such as:

  • Commercial perspective
  • Relationship building and communication
  • Strategic planning
  • Conflict resolution
  • Project management

Making this leap will not be easy, as finance directors continue to face a heavy workload from the traditional areas of the job. However, those who are able to adapt to the new environment are in a strong position to play a crucial role in driving their businesses forward.

  

Funding is crucial

The more risk-averse approach of the banking sector to SME finance following the banking crisis has changed the way many growing companies think about funding.

This is a central challenge for finance directors today. They must ensure that the business not only has the cash flow and operating capital it requires for day-to-day operations, but that it also has funding in place to underpin its ambitions for growth. This is an area where chief executives are looking for their finance executives to take the lead.

Late payments continue to bite

Many finance directors are struggling with a late payments problem that continues to deteriorate.

Late payments are now a problem for over half of all UK SMEs according to the latest Close Brothers Business Barometer. This is a serious issue for finance directors. The late payment of bills poses immediate difficulties for finance departments attempting to manage the business’s cash flow. And where resources are diverted from elsewhere, they are not available for investment in projects aimed at delivering profitable future growth.

For many finance directors, invoice finance provides a potential solution to the concerns about conventional funding and late payments. It is a way to unlock the value tied up in the company’s unpaid bills so as to provide finance that can be used to ease cash flow pressures today, freeing up funding for tomorrow’s growth strategies.

Invoice finance is not a new concept, but both awareness of its advantages and take-up from SMEs has increased notably in recent times as funding from the banks has become more 

Funding for strategic growth

Many finance directors are now beginning to think in broader terms as they seek funding for strategic growth

Modern finance directors are rethinking their priorities. In their new roles as strategic business partners to the CEO and other executives, they’re constantly assessing how to ensure their businesses are capable of exploiting the opportunities that lie ahead, while also protecting the company from the risk of setbacks and disappointments.

In order to achieve that balance, finance directors must secure a sound funding foundation for their businesses. The first challenge is to ensure that operational cash flows are sufficient for the business to meet its responsibilities. But finance directors also know they need resources for investment in the future.

These demands must be seen against a backdrop of a banking sector where funding for SMEs has never come close to returning to the levels seen before the financial crisis and a trading environment in which late payments continue to challenge many companies.

Within this context, it’s not surprising that many FDs are increasingly turning to differing sources of funding, such as invoice finance, in order to manage risk and achieve their aspirations.

John Bevan, a former banker with Royal Bank of Scotland and Barclays, says, “Traditional debt finance remains difficult to obtain for many businesses, and may not be the right fit. Companies are more aware of alternative forms of finance than they were several years ago.”

To recap Bruce Besanko’s comment, many finance directors today are at “the absolute centre of the universe” within their organisation. The job of exploring alternative funding options is just one part of their more strategic role to set the future direction of travel for their business.

 

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