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What does a part-time Financial Controller do?

Thinking about a Part-time Financial Controller?

Have you ever thought about using a part-time Financial Controller?  Would you benefit from having access to additional financial management skills?

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.

Their annual accountant comes in during the year to prepare quarterly management accounts. He also attends monthly management meetings to provide financial input to business decisions.

The business owner is not satisfied with this arrangement.   He would like to have an internal controller but he knows that he cannot afford that option.

Option of a Part-time Financial Controller

I asked him if he had considered using the services of a part-time financial controller.  He didn’t realise that was possible.

The option of having a part-time controller is quite common now.

There has been a growth, in recent years,  in the number of companies availing of the services of part-time financial controllers.  This is partly due to the rise in the use of computerised accounting systems and also due to the increased awareness of the need for better financial management skills

What does a part-time financial controller do?

Start by understanding the business

The first thing a financial controller (FC) will do on starting an assignment is to understand the business and the needs of the owners/managers.

Typically, the part-time FC will want to get familiar with the products or services, the customers, the production or delivery process, the inputs and the suppliers.

He/she will want to be clear on the goals of the business so that he/she can provide better support.

Create helpful, relevant reports

They will use their understanding of the business to identify what sort of financial analysis is needed for the business.

This could include how sales are analysed, how purchases and overheads are analysed and what cost centres or departments should be used if any.

Usually, the FC will have an input into the development of Key Perfromance Indicators (KPIs) for the business although the KPIs should not be just financial (see article on KPIs here).-

Optimise the financial processes

Next, they will look at the work flows within the department identifying who does what ,what controls are in place to secure the companies assets and if they have appropriate systems and if they are using those systems well.

They will also want to ensure that the activities required to support the business and to produce the  financial reports are clearly identified and allocated to staff with appropriate skills and experience.

Assess and Develop existing staff

At some point, the FC will review the existing staffing of the department and form an opinion on how much support and/or development they might need.

The staff will look to the FC for technical guidance.

Prepare Budgets/Forecasts

The FC will usually 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.

Preparation of Management Accounts

The activities that I have already talked about are all necessary if you want to have high quality management accounts.

This is where most of the FC’s time will be spent.  The FC will pull together draft accounts and check them to make sure they are reliable.

The management accounts will show if the plans of the business are on track.

By drilling down into these accounts the FC will develop his/her understanding of what is going on in the business.

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

Providing Financial Inputs to Decision Making

As the business is carried on, issues crop up that will require decisions and the FC can provide key financial inputs to those decisions.

These decision may be about pricing or investment decisions.  They can be about adding or discontinuing product lines.  Every business has to make decisions and these decision usually benefit from a financial input.

The FC will draw on his/her understanding of the business and on the reliable accounting information that is being prepared under his/her guidance.

The FC will have to support management by explaining the decisions using excellent communication skills.

Adding Experience to the business

Usually a part-time controller has already held a full-time controller position and can bring that experience to their clients.

Additionally, because most part-time 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.

In this way, the part time FC can help the client adopt best practices from sectors that they may not normally be exposed to.

What skill sets does a part-time FC need?

Firstly, the FC will need to be able to develop a good understanding of the business.   He/she will need excellent commercial awareness.

It would be expected that a part-time FC would have good accountancy skills.

He/she will have to have good relationships with the 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 FC will likely have a number of different clients and will need to be able to manage time.  They should also be able to easily switch between clients without having to spend a lot of time catching up.

How much time will an FC 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 FC will have to input.

For some businesses, the time input can be as little as a half day per quarter.  For others, it can be as high as 2 to 3 days per week.

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

Normally, the part-time FC will sit with the client and understand the clients business and needs.  They then discuss they different elements of the service and can allow the client to customise the service to suit what they need.

What businesses need a part- time accountant?

If you are having any of the following problems, then you should consider hiring a part-time FC.

  • Disappointing profitability
  • Cashflow problems
  • Accounting surprises at year end
  • Having problems 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

Why do you need more than one accountant?

Sometimes businesses ask why they need another accountant when they already have an annual accountant.

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

If your annual accountant can give you the financial analysis and insights that you need then that is fine.  You don’t need someone else.  However, if you are not getting information and explanations from your annual accountant, then you may  want to get those insights from someone else.

Some business owners like to have one accountant who provides part-time controller services and also does the compliance work.  Other owners like to have the year end work done separately.  It doesn’t matter and its pretty much a subjective decision for the business owner.

Management Accounts v Annual Accounts

The focus of a 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.  By compliance we mean preparing the annual accounts and the annual return and the tax returns.

Conclusion

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

Having the services of a part-time controller available lets the business owner have access to better information and analysis skills at a fraction of the cost of a full time controller.

Over to you

Have you had experience of working with a part-time financial controller?  Was it beneficial.

Have you 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”.