Do small businesses need in-house finance people?

wooden houses and magnifying glass property valuation home appraisal choice of location | Do small businesses need in-house finance people?
By Karen Williams | 7th March 2023 | 4 min read

People don’t create businesses so they can spend time looking at their accounts.

Ultimately, financial management takes you away from the excitement of running the business and let’s face it, we aren’t all experts in balance sheets and profit & loss.

But without good financial management, your business will undoubtedly suffer. Money won’t come in when it’s meant to and you’ll be making business decisions based on gut rather than fact.

Expert advice, not menial tasks

A finance professional or team, therefore, plays a crucial role in any business, big or small.

They handle the bookkeeping, accounts payable, cash flow, forecasting, maybe even stock and most likely payroll, as well as keeping you compliant with HMRC (preventing you from paying too much tax, or too little).

Finance directors also play an essential role in helping navigate economic pressures, putting measures in place that increase financial health and resilience – clearly an invaluable benefit at the moment!

But these great benefits come at a price! Financial management is a skilled area requiring highly trained personnel.

It’s not just a menial task involving entering information into ledgers; small businesses could be looking at around £100k a year to have a fully qualified finance person or small team in-house.

Breeding inefficiency

Due to the cost, many opt for small business cloud accounting and do it themselves.

Meanwhile those who have invested in finance people can find they get held back by their current set-up – perhaps the team is too small to cope with the growth they want to achieve or is overmanned and inefficient for much of the year except during peaks.

On the other hand, some businesses employ one finance person, but what happens when they go on holiday or are sick? Nothing.

Have you considered a Virtual Finance Director?

A Virtual Finance Director (VFD) is exactly as it sounds; a qualified finance expert who fulfils the role of a Finance Director without being on your payroll. Working virtually/remotely, they can undertake as much or as little as you need.

The VFD is a great way for SMEs to get support in running their business, offering access to an experienced financial professional at a fraction of the cost.

According to our recent LinkedIn poll, almost half of accountancy practices offer (or are planning to introduce) VFD services for their clients.

This is a natural evolution of their services as more and more businesses see their accountant (the company that traditionally might file your annual return) as a trusted business advisor.

Whilst services differ from firm to firm, typically you have access to someone who can assist with the traditional duties of an FD, such as monitoring your financial health and offering insight & guidance on all company decisions, as well as the usual accounting affairs such as compliance, tax and VAT.

How about the Outsourced Finance Team

Alternatively, you could opt for an Outsourced Finance Team service – this is essentially a complete finance function, delivered in return for a monthly fee.

An Outsourced Finance Team manages all your accounts (sales and purchase ledgers), providing you with regular updates of cash commitments and cashflow, helping you understand your overheads, manage debt recovery, put in place strong credit control and scrutinise your profit/loss.

You can’t put a price on good advice

Running a business can sometimes be a lonely place and it can be difficult to make the right decisions without a second opinion and someone to discuss ideas with.

Sometimes you just need to be told that an idea is good or bad.

Increasingly, accountancy firms are a tech-savvy, mobile-friendly bunch who offer a variety of advisory services designed to suit your needs.

Digital tools enable accountants to be more nimble and give a new lens into your business, helping to provide counsel and become a partner for growth. 

More time for you to concentrate on your business

Dundee-based MMG Archbold, for example, is focused on the set-up and management of the entire finance function for clients rather than just processing the books and VAT.

MMG Archbold uses cloud accounting software so their clients can see the performance of their business in real-time.

The use of small business accounts software ensures that your accounting function is always handled to a very high standard every working day of the year + your records are electronic and MTD-ready.

Let’s get excited about our businesses again!

It’s been tough recently, and whilst the recession is panning out to be lighter than expected, its effects will likely have a long tail.

My advice? If you haven’t done so already, reach out to your accountant to see what additional services they may be able to offer you. A health check perhaps, or ask about their advisory services, VFD and Outsourced Finance team offerings – it may be the best thing you do.

In the meantime, focusing on your business strategy and ensuring it's foolproof is a great next step – read our basics to business strategy blog to learn more about what factors need consideration.

Let’s all get back to growing our businesses and leave the financial management to the experts.