If I was your Finance Director

The first thing I will be doing when returning from holiday is sit down with my team for a post holiday debrief. They are already trained and mentored to think commercially, and to understand the early warning systems that we have created and their potential impact on the business. They are also able to confidently discuss them with senior management.

Finance Directors, be they part time or full time are only as good as the team that they put in place, and whether they are dealing with a part time bookkeeper or a fully fledged finance department the principles are the same. The aim is to have a team that is able sniff out any problems well before the monthly management accounts are produced.

Early warning systems are crucial in that they give businesses plenty of time to respond quickly, and get things right. Such systems are often a mixture of financial and non financial indicators and are based on a good understanding of all aspects of the business, and a keen application of eyes and ears.

One such system is obviously cash. Cash is the one best ways of checking what is happening in a business, in that you can see it daily and it rarely lies. Not surprisingly in the current climate we have been preparing cash flow forecasts for some time. They are regularly updated and are checked on an almost daily basis. I make sure that cash flows and movements are carefully scrutinised, so that we have a pretty good idea as to how our cash flows behave. Therefore any deviation is immediately spotted and checked in case it highlights a risk or a problem.

Another area that will be carefully checked is sales margins. Note that I say sales margins and not sales turnover. Sales are clearly important but unless they are generating satisfactory margins and are covering the cost of servicing them they are not viable in the long term. That is not to say that having then checked our stocks to see what is obsolete or slow moving stock, some deals can't be done, but it needs to be done in a controlled fashion, and as part of a stock and cash management strategy. 

Coming back from holiday I will also be reviewing the financial status of customers and suppliers. Post holiday season is a high risk time for business insolvencies, and while I would already be as aware as possible as to how our customers and suppliers have been coping with the current recession, and have already taken action to protect the business, there is no harm is checking some more. Note that I mention suppliers. Suppliers are an important source of credit and new suppliers in the current climate may not be as generous with their credit as existing ones are.

And a check on competitors is also on the list of tasks. If they are financially weak then it could present some interesting opportunities. A common piece of advice is that you should look to buy them, but I think it is sometimes better to wait for them to go under or to try and hasten their demise by targeting their best people, and trying to get them to join our team.

It is normally about this time that my thoughts turn to preparing a budget for 2010. Actually my thoughts are always on planning for the future as this is something that I see as a continuous dynamic exercise, rather than the static exercise that I guess most of us who have worked in a corporate life are used to. Corporate budgeting does give the process a bad name as it often seems to be more a political game and less an essential document that can be used to steer the business.

This is why budgeting needs to be flexible and not necessarily totally about numbers. As any investor reviewing business plans will tell you, they will look at the market, the product and the people before they even think about looking at the numbers.

Costs are going to be another area of post holiday scrutiny. What new information have we learned about our cost base recently? What contracts are coming up for renewal? Which of our suppliers is performing badly? Have our purchasing patterns changed? Which business lines are down? You can never stop looking at costs or thinking about how to reduce them but budget time does tend to focus the mind of most people in the business so it an excellent time to ask some searching questions about costs.

So the life of a finance director is never dull, especially at this time of year, and you may wonder how we find time to do all of the above, particularly those of us who do it on a cost effective part time basis. The secret is good people, good systems but most of all, the ability to never stop thinking about what the business is doing, what can be done to improve things, and how the finance function can contribute to making them happen. If I am doing my job then my colleagues in the senior management team can get on with theirs, safe in the knowledge that they don't have to worry about finance.