By James Nicholson-Smith, Business Development Director & Managing Principal, West Midlands Region, The FD Centre
It is often said that a Finance Director is the sales prevention officer in a business. Perhaps there is some truth in this if the FD concerned is inward looking and entirely focused on eliminating cost and inefficiency rather than increasing profits and growing the company.
As an entrepreneur you have to ask yourself what you are expecting of your Finance Director? If you expect the above, you will ultimately employ an FD who is a good policeman and a bean counter and not a bean grower. More often than not, this is a recipe for conflict in the management team.
Ultimately, most entrepreneurs of ambitious businesses want a Finance Director who understands the cost of acquiring a new customer and the benefits of retaining existing customers who make repeat purchases.
It is all very well securing new clients, but many businesses over invest in this process to make up for the fact that their existing customers leave. A good FD should be vigilant in monitoring client wins and losses, and customer profitability. There are a number of investment projects that could be considered including:
1. Introducing controls into the sales process to ensure that customers needs are matched to the company’s delivery capabilities to ensure maximum customer satisfaction.
2. Invest in processes of communicating with existing customers to entice them into repeat sales.
3. Competition analysis to see why customers may change to alternative suppliers.
4. Depending on your business sector, loyalty schemes may also be beneficial.
5. Introducing supply agreements to encourage ongoing sales and scheduling of requirements on an exclusive basis rather than spot buying.
6. Customer questionnaires to validate customer satisfaction.
7. New product development to more closely track changing customer demands.
8. Improved availability of aftersales spare parts to ensure products are properly supported.
9. Marketing support for consumer products.
Many businesses make the mistake of trying to do a bit of each rather than developing a well thought out strategy focusing on only 1 or 2 activities, which effectively retain clients. The returns from a successful implementation of a client retentions strategy almost always justify the investment.
The FDs role should to be to identify the need to address the problem, contribute to the proposal of the solution, cost out the projects selected in terms of management time and investment money required and then introduce monitoring systems and controls to minimise the risk of a bad implementation.
Many SME (Small and Medium Enterprises) owners run the finance function themselves. This often means that the above just does not happen. For this reason many SME owners are looking to involve part time finance directors in their businesses to free up their time to focus on growing their business profitably.
As the largest provider of part-time Finance Directors in the UK, the FD Centre can help businesses achieve their strategic objectives. To find out if your business could benefit from a FREE Business Strategic Review and receive valuable advice for your business’s financial planning, visit www.thefdcentre.co.uk
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