With the current tumultuous landscape of escalating energy prices, a cost-of-living crisis and a squeeze on household incomes forecast to continue – not to mention a recession on the horizon – it has rarely been more important to have a capable, agile finance leader at the helm, irrespective of whether the company is a multinational or a small business.

Many businesses have struggled through the past two years of pandemic and intermittent lockdowns, but insolvency fi gures currently show the number of companies going bust has risen fast since government support measures ended.

The forecast is for many more businesses to fi le for insolvency as conditions worsen. A recent survey of over 500 senior managers, executives and business owners from companies in the UK and Ireland by MHR Global found that despite business leaders saying resilience and agility are more a priority now than five years ago, many admitted they can only ‘just about cover it’ when having to respond to market shocks. But could leadership in fi nance make the difference?

Overseeing a fi nance team, however large or small, requires an individual to be fl exible and adaptable as market conditions change. Finance leaders also need to have a broader overview of the business to understand how finance can improve or help the wider business operations.

The big picture

Patrick Tigwell, partner at south west-based accountants Thomas Westcott, says: “The finance lead needs to be numerate and understand figures, ratios, and key performance indicators. They need to see the wood and the trees in that they need to see the big picture - the big fi nancial decisions that must be made but, also the day-to-day decisions such as 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.” Hayley Brightmore, the founder of Knight Transaction Services and previously a due diligence specialist at Mazars and Grant Thornton, concurs.

Brightmore says: “There are four key areas where being a good leader - rather than a mediocre leader - can make the difference between success capabilities that business owners need from their finance leaders."

Mark Bodger, director at ICit Business Intelligence, thinks so. “Finance leaders need to have a deep understanding of fi nance and operations to advise on the most profi table business opportunities and to avoid high-risk, non-core, ventures. A key skill is to be able to cut through the data and walk people through the meaning behind the numbers so they understand the implications and can make better informed decisions.”

Pass on work The ability to delegate will also be vital in these economically challenging times. And when times get tough, the pressure on teams grows too, so strong people skills must be honed. Tigwell says: “Finance leads will need to retain their overview and eff ectively delegate to other members of the team. “Delegating the right task to the right team member is a key skill. The team is likely to be under pressure, and it is vital that the team members feel supported and valued and are given tasks appropriate to their skill set.”

One vital skill that might be overlooked in a fi nance lead is the ability to challenge the boss, and communicate clearly why, by providing current data and insights.

“A skill that is not at fi rst 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 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 fi nancial advice can be given,” Tigwell says.

The challenges ahead are not to be underestimated and with fi nance teams perennially under-resourced, fi nance leads in small businesses will face signifi cant hurdles but with the skills that accountants possess there is no better time to prove the worth of a strong, agile finance leader.

Brightmore says: “Strong people skills are essential. Your chief executive and other senior leaders are likely to be far more engaged with the fi nancial side of the business if you make the numbers talk and give your expert insight into what this means in real terms. Owning the reporting and delivering it in a way that promotes action can truly transform a growing business’ fortunes.” 

HOW THE FINANCE FUNCTION CAN SUPPORT A POTENTIAL EXIT

Finance functions play a vital role in leading and driving controlled growth, securing funding and improving earnings quality. The depth and quality of data produced signifi cantly aff ects long-term success.

With a tricky economic landscape ahead, some business owners may be looking for an ‘out’. To successfully sell a business however, the quality and accuracy of financial information is critical to achieve a premium valuation. Charlotte Ashton, founder and director of Implicit Advisory, says: “A strong fi nance function manages operational requirements, such as cashflow, and proactively produces timely data in support of strategic planning. Financial data is frequently treated as a historic exercise, with information produced too late, providing limited insight to facilitate agile decision-making.”

Ashton says funders, investors and buyers, particularly when supported by financial due diligence, will be looking for detailed management accounts with variance analysis, produced within two weeks of month end. Investors will also want to see a well maintained integrated fi nancial model, including cashflow and evidence of regular performance review to maintain forecasting accuracy.

Ashton says: “The quality and consistency of these outputs are critical success factors when attracting new stakeholders into the business. These areas and basic controls are consistently absent in businesses I advise, with fi nance functions under resourced and lacking key skills to support the decision makers in reacting to market changes and driving growth. Upskilling and investing ahead of growth is key to success."