What’s the point in a Strategic Financial Partner (SFP) / Virtual Finance Director?

Something we often hear when speaking to another business is “well I was paying my last bookkeeper half what you charge”. I then explain to them why we are not their last bookkeeper, we are not JUST bookkeepers at all.

They then might say “well I have an Accountant”. That’s great, but we are not your Accountant either.

So what the hell is a Strategic Financial Partner? Let me explain the different between the three roles.

Bookkeeper:

As a business, you receive invoices from suppliers, you send invoices to your customers and then those invoices get paid through the bank. You’ll send the paperwork to your bookkeeper, they’ll do something magic in the background and then miraculously you may or may not get some reports showing you how much money you’ve made, what you owe to your suppliers and what your customers owe you.

The ‘magic’ is your bookkeeper putting those transactions into the correct boxes so that the reports you get are actually useable. That means not just putting all your expenses into ‘general expenses’, for example. This requires experience and knowledge. Finding a good bookkeeper is not an easy task, contrary to popular belief, but if you can find one they are invaluable, but that’s a conversation for another day!

That’s the bookkeeping process at its simplest. The Bookkeeper might do your payroll and VAT returns, but in a nutshell that’s it.

Accountant:

So, you know what your Bookkeeper does now. What about your Accountant? All that stuff your bookkeeper has done throughout the year, you’ll send to your Accountant and they will create a set of yearly accounts to send to Companies House, a yearly tax return for your company and often a tax return for you and any other directors. If they’re proactive, they might tell you beforehand what your tax bill is likely to be, or what the information means (do you know what a P&L and Balance Sheet is and what it’s telling you?).

You might ask them questions about stuff and they’ll often answer with the assumption that you’re also an Accountant and, ergo, after the conversation you still have no idea wtf they’re talking about. However, if you want to pay less tax, a good Accountant is worth their weight in gold. Again, finding a good Accountant is often easier said than done too (we know a few if you need help finding a good one).

Strategic Financial Partner (SFP) / Virtual Finance Director?

So your bookkeeper has done the data magic and your accountant has done the tax magic, but what about using the information that those two roles have compiled? I’ll ask the question again.

Do you know what your Profit and Loss and Balance Sheet are telling you and how to use them to make the right decisions at the right time?

This person first and foremost takes the information provided by your Accountant and Bookkeeper, interprets it, and then helps you to understand it to look to the future and do things like – in short, they help you look to the future and not the past:

-      Get funding

-      Grow your business

-      Grow your bank balance

-      Get control of your cash situation

-      Grow the value of your business

-      Cut costs

-      Make sure you’re doing things as efficiently with your money as you can be

-      Looks at new revenue streams

-      Looks at where your business is profitable and where it isn’t so much

And many, many other things.

On top of that, they should take an objective view of your business as a whole, look at processes, controls, cashflow, reporting, your long term and short term goals etc and help get all of it as slick as possible. They will also deal with your Bookkeeper and Accountant for you and work with them to ensure you’re getting the biggest tax savings and the best information you can get.

How do I know if I need a Strategic Financial Partner (SFP) / Virtual Finance Director?

Realistically you don’t need one if you’ve just started up. An Accountant and maybe Bookkeeper will do.

You probably don’t need one until you hit one of more of these milestones. I’ll also explain why.

1.    Over ￡500k turnover: This is the point at which it becomes really important to keep an eye on the management accounts. Business owners often hit this threshold and go through a period of growth. Managing this properly is essential to ensure the health of the business. Accidentally overtrading (when a business cannot manage the rate of growth) is very common at this level and can put a business into insolvency before they’ve even realised it’s happened. 

2.    Over 3 - 5 years trading: Correct me if I’m wrong but:

Year 1: Just starting out, big plans, trying to get clients, finding your feet, watching cash.

Year 2: Got some clients, need more, start thinking about recruitment to manage clients and grow, still watching cash but spending more on trial and error services. Got an Accountant to deal with last year.

Year 3: Recruited (tried to delegate as soon as recruited, realised that people actually need training after you spent more time IN the business fixing stuff, rather than ON it because you didn’t train properly), found feet, continuing to grow, wasted a lot of money in year 2 on services you didn’t need, found suppliers you like, feeling a bit more comfortable. May or may not have had a good experience with the first Accountant and may or may not have changed, might have got a bookkeeper.

Year 4: Learned lessons from previous years, recruited some more people (and trained them properly), business is in maturity. You’ve made the silly mistakes of year 1 – 3, got your true focus, found the suppliers you like, cash is looking good, you’ve stopped looking at it every 5 seconds, if a supplier puts their prices up then that’s cool because you like them and they give you a good service. You got through the first 3 years and now you’re feeling ok. You’re feeling comfortable, like not a lot can touch you.

This is when it’s time to start looking for a Strategic Financial Partner. This is the point at which everything can go wrong very quickly, but you should be concentrating on the fun side of your business and growing it, not the financial stuff.

3.    Looking for investment or funding: If you’ve ever watched Dragon’s Den, you’ll know about all the business owners who go on and start with an amazing pitch about how and why they started their business, all the wonderful things their business does and the issues it solves for its clients. “Amazing”, you think, “these guys have got a real chance here!” 

Then the dragons start asking things like “what are your margins?”, “how much do you take salary?” and “what’s your net profit?”. Uh oh! Business owner falls apart or tries to bullsh*t their way through the rest of the pitch, investor is well and truly OUT!

An SFP would have saved them from this situation and they probably would have the funding (assuming a decent business in the first place, but the SFP would have told them if that wasn’t the case and helped them fix it long before they even stepped foot into the ‘Den’”).

All of these scenarios often involve a Bookkeeper and an Accountant who may or may not be any good. The Strategic Financial Partner will manage them both properly, to enable you to concentrate on the things that made you want to start your business in the first place, not get into trouble and, basically, become unstoppable with the financial head right by your side.

Further to all of those scenarios, an SFP should be able to recognise when you have outgrown them and should be able to help you to recruit the next person, or team, to take you to the next level.

So, hopefully that should provide you with a better idea of what the difference is, and why an SFP is so valuable to you and the future of your business.

What do you think?

What could a Strategic Financial Partner add to your business?

Are you struggling with the current crisis and have questions?

I’d really love to hear your thoughts.

If you need any help and advice, please get in touch at [email protected] or 01908 429294.