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Outsourced Financial Controller

What Does An Outsourced Financial Controller Do?

If you struggle to get reliable financial information, or you cannot understand the information that you are getting, then you should consider taking on an outsourced or part-time financial controller.

I was talking with a business owner recently who is running a substantial, exporting business.  They don’t have any qualified accounting staff in-house.

At the end of the year, the external accountant prepares the annual accounts but these accounts arrive several months after the year-end and they don’t shed much light on why the business is getting the results they are getting.     The business owner isn’t happy that they are helping him to manage the business.

Option Of An Outsourced Financial Controller

I suggested that he consider using the services of an outsourced financial controller.  He hadn‘t realised that this was possible.

The option of having an outsourced controller is quite common now.  There has been a growth, in recent years,  in the number of companies taking advantage of the services of outsourced financial controllers.  This is partly due to the rise in the use of computerised accounting systems, which make it easier to analyse and understand the information, and also due to the increased awareness of the need for better financial management skills.

Outsourced Financial Controller

What Will An Outsourced Financial Controller Do For You?

1. Understand the business

The first thing that I would do on starting an assignment for you is to understand your business and what information you will need to run the business.

Typically, I will want to get familiar with your products or services, with your customers, with your production or delivery process, and finally with your suppliers and what you buy from them.

I will also want to be very clear on the goals of your business so that I can provide better support.

2. Design systems to give you the financial information that you need

I would use my understanding of your business to identify what sort of financial analysis you need for the business.

This could include how your sales are analysed, how your purchases and overheads are analysed and if you should be making use of cost centres or departments.

Usually, I would help you to identify your Key Performance Indicators (KPIs) for the business although the KPIs should not be just financial.

3. Optimise the financial processes

Next, I will look at what you are currently doing with your financial information.  I will want to understand the workflows within your accounts department – identifying who is doing what, what controls you have in place to secure the company’s assets and what sort of systems you have and if you are using those systems well.

4. Assess and develop existing staff

I will also want to ensure that everything that needs to be done has been identified and allocated to someone and that they are clear on what they have to do and that they have the appropriate skills and experience.

While getting familiar with your business, I will be interacting with your staff and I will form an opinion on how much support and/or development they might need.

Usually, I work with the existing staff – coaching them so that they are comfortable doing what needs to be done.  But sometimes, if there’s no one to do the job, I help to hire someone to fill this role

I will also be available to answer any questions that they might have.

5. Prepare budgets/forecasts

I like to prepare an annual financial budget for the business.  This will be based on assumptions about growth, staffing, costs, and investment plans.

The budget will show how profitable the plans of the business are and will highlight any problems with cashflow.

Depending on the business, this budget may have to be updated 2-3 times during the year to reflect developments that are emerging as they work through the year.

The budgets will feed into the monthly management accounts.  By comparing actuals to budget the management will develop their understanding of the business and will become much better at budgeting.

6. Cash management

Most businesses need to manage their cash closely.  Even when a business has large cash reserves, you find that they have built these up by managing cash closely and that they continue to do that.

The financial controller will develop short and long-term cash forecasting and management procedures and will provide guidance for the staff in how to work with these.

7. Providing financial inputs to decision making

As the business is carried on, issues crop up that will require decisions and as an outsourced financial controller, I can provide key financial inputs to those decisions.

To do this I draw on the understanding of your business that I have built up by working in your business and also on the reliable accounting information that is now being prepared in your business.

Outsourced Financial Controller

What To Look For In An External Financial Controller

It would be expected that an outsourced financial controller would have good accountancy skills.

Secondly, your outsourced financial controller will need to be able to develop a good understanding of your business.   He/she will also need excellent commercial awareness.

You should be looking for an outsourced controller that has already held a full-time controller position and can bring that experience to your business.

Additionally, because most outsourced financial controllers have many clients they will be exposed to lots of different businesses.   They can take the best ideas and practices from one sector to another.

Your outsourced financial controller will have to have good relationships with your management and staff and will require to be able to communicate accounting information in a way that is easily understood by a non-accountant.

The outsourced financial controller will likely have a number of different clients and will need to be able to manage time and to be able to easily switch between clients without having to spend a lot of time catching up.

How Much Time Will A Financial Controller Need To Input?

That depends on the business – both on its complexity and on its stage in the business life cycle.

A young ambitious business with challenging growth plans will need more time than a mature stable business.

It will also depend on the quality of the in-house accounts staff.  The more you can delegate to them, the less time the outsourced financial controller will have to input.

In my experience,  the time input can range from as little as a half-day or a day per quarter and can be as high as 2 to 3 days per week.  It really depends on the outputs you want and the resources already within the business.

Typically, I find 1-2 days per month the most common.

Normally, before taking on an assignment, I will sit with you and understand your business and needs.  We then discuss the different elements of the service allowing you to customise the service to suit what you need.

Who Needs An Outsourced Financial Controller?

If you are having any of the following problems, then you should consider hiring an outsourced financial controller.

  • Disappointing profitability
  • Cashflow problems
  • Accounting surprises at year end
  • Difficulty  explaining the performance of your business to your bank managers
  • Having aggressive growth plans that require tight financial management
  • Thinking about bringing external investors on board
  • Not satisfied with the explanations that you are getting from your annual accountant

Management Accounts vs Annual Accounts

The focus of an outsourced financial controller is usually on delivering management information.  This will help management understand the financial effects of their decisions.

The focus of the annual accountant is usually on compliance – preparing the annual accounts and the annual return and the tax returns.

Do you need more than one accountant?

You don’t have to have more than one accountant, but sometimes different people have different skillsets and you may be better off having 2 or more people with specific skills rather than one generalist.

Some business owners like to have one accountant who provides outsourced controller services and can also handle the compliance work.  Other owners like to have the year-end work done separately. It doesn’t matter and it’s really down to your own preferences.

hiring-financial-controller

Conclusion

Running a business can be demanding but there are resources available to modern owner managers that were not available prior to this.

Having the services of an outsourced financial controller available lets the business owner have much better information and analysis skills available at a fraction of the cost of a full-time controller.

Over To You

Have you had the experience of working with an outsourced financial controller?  Did you find it beneficial?

If you have any comments or advice to offer to others, feel free to leave a message in the comment sections.

Assess your Financial Management Capability

The financial management capability of Irish SMEs varies significantly.

I have been working with many Irish SMEs over the past 20 years helping them to improve their financial management capability.  Over time, I have observed a number of different stages that businesses go through as they develop their skill levels.

I have set out in the table below the characteristics of the various stages that I have identified.

Not every business goes through all these stages nor does they spend the same amount of time in each stage.

A high potential business with external professional funding will usually put a high level of financial management capability in place from the start.  A start up that is growing organically will usually develop their financial management capability as the business grows.

Use the table to identify where you are and what you have to do to improve.

Levels of Financial Management Capability

Level
Activities Internal Outputs External Outputs Resources
Minimum Business run from bank statementss

Records sent to external accountant who does VAT, PAYE and prepares accounts at year end

None VAT Returns, PAYE Returns, Annual

Accounts at year end

Clerical Staff
Book-keeping Basic Record sales, purchases, payments and receipts.

Payroll Calculations using payroll software.

All files to the accountant at the year end

VAT Returns, PAYE Returns

Reasonably reliable customer, supplier and bank records

 

Annual Accounts at year end Book-keeper, not necessarily qualified
Bookkeeping Plus As Bookkeeping Basic with

Checks and Verifications on bank, supplier and customer balances

All files to the accountant at the year end

VAT Returns, PAYE Returns

Highly reliable customer, supplier and bank records

 

Annual Accounts at year end Usually qualified book-keeper with some experience, could be a trainee accountant
Accounting Basic As Bookkeeping Plus with

Management Accounts prepared at least quarterly incorporating accounting adjustments for stock, accruals and prepayments, depreciation

VAT Returns, PAYE Returns

Highly reliable customer, supplier and bank records

 

Management Accounts (at least quarterly)

P&L, Balance Sheet, Customer Balances, Supplier Balances

Usually qualified book-keeper with some experience, could be a trainee accountant

 

Part time controller for management accounts

Financial Control As Accounting Basic with

Management Accounts reviewed with Senior Management

Short term cash flow projections

Annual Budgets prepared

 

VAT Returns, PAYE Returns

Highly reliable customer, supplier and bank records

 

Reliable Budgets

Highly reliable management accounts

Including Actual v Budget P&L

 

Internal accounting staff with experience and some qualifications

 

Part time controller for management accounts, budgets and projections

 

Financial Control Plus As Financial Control with

Product costings from budget data

Short term cash flow projections

Financial Projections updated quarterly

VAT Returns, PAYE Returns

Highly reliable customer, supplier and bank records

Short term cash flow projections

Highly reliable management accounts

Reliable Budgets and product costings

Reliable projections

Basic analysis of variances

Financial inputs to decision making

 

 

Internal accounting staff with experience and some qualifications

 

Part time controller for management accounts, budgets and decision inputs

 

Strategic Control As Financial Control Plus

With multi year-long range planning

Full Financial Evaluation of all key business decisions

Robust financial model that can quickly support what if evaluation of various options

 

VAT Returns, PAYE Returns

Highly reliable customer, supplier and bank records

Short term cash flow projections

Highly reliable management accounts

Reliable Budgets and product costings

Reliable projections

Basic analysis of variances

Financial inputs to decision making

Long term funding requirements identified with plans to address them

Internal accounting staff with experience and some qualifications

 

Usually fulltime (but possibly Part-time) controller for management accounts, budgets and long range plans and for decision inputs

 

What does this mean for you?

You should use the characteristics in the table to identify where you are now.

Then you should ask if this is sufficient for you and for your business.

Ask yourself if you have the appropriate skill levels to do what you need to do.

Whereever you have gaps, then you need to put a plan in place to close the gap.

This plan should identify what must be done, who will do it and when will it be completed.

How I can help?

With many years’ experience working with SMEs I can help you complete your diagnosis and put improvement plans in place.

I can help you by coaching your financial staff to grow in to their roles or, where necessary, by hiring appropriate staff.

We can work together to create a practical plan to address the needs of your business.

Offer

I am offering a two hour assessment of your financial management capability with no obligations on your part.

This assessment will be restricted in that I can only offer one per week.

If you want to have your financial function assessed, feel free to send me an email with subject “Assessment of Financial Management Capability”.