Once a CEO realises that the next person to be offered a seat on the board is a finance director, the first question is always, “How much will it cost me?”
It’s sometimes difficult to calculate the true cost of a finance director. That’s why the answers to these questions are rarely as straightforward as revealing the going salary for such a role!
In this blog we answer the most frequently asked questions:
- Does my company need a finance director?
- What do you need to consider before recruiting a finance director?
- What is the real cost of a finance director?
- How could a part-time finance director help?
Does my company need a finance director?
If you are asking yourself this question, the simple answer is probably yes! And if you are reading this article, then it’s likely there is a compelling reason behind the question.
However, the more appropriate question is perhaps, “does my company need a full-time finance director”?
Growing a business isn’t easy, but without experienced financial know-how, it will be almost impossible.
Most CEOs are great at disruptive thinking, growing the customer base, product development and the big picture but will need extra support with capital management and cash flow, profit margins, monitoring KPIs or fundraising, etc.
Related Article | How to find and effectively use a part-time FD to grow your business
What do you need to consider before recruiting a finance director?
Establishing “what is the cost of an employee?” is one of the central questions a business manager needs to be able to answer.
Firstly, it is essential to determine the real cost of an employee. The actual cost of recruiting a finance director is MUCH more than just the salary. When you factor in recruitment costs, tools for the job, office space, healthcare, bonuses and share options the cost is nearly double their salary.
Secondly, does the CEO really need a full-time finance director now or just require access to their knowledge, experience, and counsel? When a company is growing, there’s often not enough going on to keep a full-time finance director fully occupied; those who do bring in such a heavyweight can find their finance director spending much of their time on low-value activities which could be completed by a less expensive resource.
Finally, few companies really know what they need or should expect from their first finance director in terms of experience, credentials, and character so recruiting one often takes longer than expected. Using the services of a part-time finance director is a sensible first step towards hiring a full-time one.
What is the real cost of a finance director?
It’s important to consider the cycle of employment as well as the cost.
- First, the individual must be recruited and inducted.
- They must be trained through formal and on-the-job training.
- Then there is a period of getting up to speed.
- Once up to speed, there is the cost of managing that individual, setting objectives, appraising performance against predefined objectives while bearing the burden of personnel and administrative expenses of holidays and sickness, etc.
- An employee also requires specific tools to do the job. They need a desk, phone, mobile phone, computer, software, a network to store documents, a printer and paper and general stationery.
Once the real cost of an employee is known, they can then answer the even bigger question, “what is the value of my employee?”.
Discovering the answers to these two questions is not as difficult as one might think, but what may surprise the reader is just how cost-effective a part-time finance director can be.
Related article | Why choose a part-time FD?
A part-time finance director will be able to work effectively either remotely or on-site, requiring only internet access and a clean, safe environment in which to work when visiting a client’s premises.
So, what is the cost of a finance director? In answer to this question and according to our calculations, the true cost of an £85,000 finance director is closer to £140,000 (see full calculations in the link at the bottom of this blog).
iFD clients have an effective part-time finance director that will cost half that and deliver more.
Click here to view our calculations of the true cost of a full-time finance director
How could a part-time finance director help?
There are very REAL benefits of utilising a part-time finance director before recruiting a full-time resource:
- They provide all the skills of a full-time finance director without the cost or commitment.
- It’s a flexible resource, use as little or as much as you like, a few days a week, a few days a month or on a project-by-project basis.
- A part-time finance director will be experienced in coming in at short notice and will deliver value quickly.
- Since part-time finance directors hit the ground running, the duration of the onboarding process is significantly reduced.
- They will have hands-on experience dealing with the financial challenges your business now faces – and is yet to face!
- You don’t need to worry about any of the HR issues.
- When it comes to the point when a full-time finance director becomes a viable option, then they can help with that transition.
Related Article | How a part-time FD can help recruit a full-time FD
BUT what is the cost if you incur all the recruitment and training costs of a full-time finance director and then you find out after six months that you have recruited the wrong person?
(Image source: iStock)