Getting your finances in order

A finance director can be invaluable in planning the future of your business and organising the mundane things, says Tom Bawden. TONY WALFORD, financial and commercial director, CLK.MPL.

For a sector experiencing such rapid growth, the design industry is woefully under-resourced in the area of financial management, according to industry experts.

A period of sustained growth has seen many design groups expand into considerable-sized companies, while retaining the mindset of a family operation.

“You can’t sustain growth in the long term unless you have good, accurate financial information and a clear idea of where you’re going and what you want to do,” says Ticegroup chairman Ian Cochrane.

Cochrane was a former finance director at Fitch before setting up as a management consultant in the design sector. He will be advising a number of his current clients to appoint a finance director.

The jobs of the finance director are many and varied and differ from consultancy to consultancy (see table).

Generally speaking, he or she will work closely with the managing director on the consultancy’s long-term business strategy. This might include assessing the commercial viability of a merger, acquisition, floatation, sustained expansion or diversification and explaining it all to the board in plain English. Should any deal go ahead, it will be his or her responsibility to execute the financial side of the process.

CLK.MPL financial and commercial director Tony Walford, for example, worked closely with managing director Chris Wood on the launch of Corporate Edge, a new subsidiary group offering strategic marketing services (DW 10 July).

Walford says he spotted a gap in the market for the service, commissioned research to confirm it and looked after the financial arrangements of the venture.

The finance director is also responsible for the day-to-day running of company finances, from cost cutting, to establishing incentive schemes, to setting up share option schemes.

Since joining The Partners a year ago, finance director Julia O’Mahony has introduced a range of new financial strategies, including the “added value fee structure”.

“When The Partners has developed a ‘big idea’ for a client which is well beyond the brief, I have negotiated with them for additional income,” says O’Mahony.

In many cases, the finance role overlaps with the consultancy’s operational side – traditionally the domain of the managing director. This includes issues such as whether the group is employing the right balance of designers, consultants and administrative staff. Walford’s job sees him responsible for both financial and operations divisions at CLK.MPL.

The finance director will often be assisted by an accountant, who will tend to act as an administrator of the financial strategies he or she draws up.

O’Mahony says the finance team can also bring a commercial instinct to its projects.

“Our background and way of thinking can be extremely useful in strategic project work, where both the client and consultancy can bounce ideas off us,” says O’Mahony.

She believes her input was particularly valuable on The Partners’ recent work for B2, Barclays’ new over-the-phone investment company, because she was able to understand the financial complexities of the subject and explain them to her colleagues (DW 8 May).

The Partners client services manager Gareth Williams points out that as design moves up the communications hierarchy and client finance directors become increasingly involved in the decision-making process, the ability to talk “their language” is increasingly important.

But recruitment consultants say the depth of O’Mahony’s input on projects is the exception rather than the rule in the design industry. They regard the general exclusion of a finance director from project work as a waste of a potentially valuable resource.

While there is no set time at which to appoint a full-time finance director, Cochrane says a consultancy should seriously consider taking one on when its workforce exceeds around 20 to 25 employees or achieves a turnover of around 1.5m to 2m. Other experts agree.

Until then the group will find it hard to justify the cost of a full-time finance director, who will demand in the region of 40 000 to 70 000 a year and a significant benefits package. An accountant tends to earn around the 20 000 to 30 000 mark.

“But many businesses can benefit from a finance director’s skills much earlier than they need or can afford to employ a person full-time,” says Willot Kingston Smith partner Amanda Merron. WKS acts as an accountant in the design and marketing sector.

“There is a growing market of highly skilled mothers who want to keep working, but not full-time. Consultancies could valuably tap into that resource,” says Merron.

Meanwhile, specialist financial consultants are appearing in the design industry to cater for the smaller consultancies.

Gary Baxter set up the consultancy Bristow Financial Management in May last year, planning to tap into the demand for part-time and occasional financial expertise. “There is definitely a real need for this kind of operation because the traditional accounting firms aren’t really geared up to dealing with the design industry, they generally don’t have the knowledge,” he says.

Cochrane says a good finance director with an interest in and understanding of design is a rare breed. “I’ve seen accountants come in and create havoc with a good business. If they don’t understand it and the cultural fit isn’t any good they won’t do a good job. They need to get on with the designers, to earn their respect and to believe in what they’re doing,” he says.

Finding a good finance director can be hard. Design industry recruitment consultants admit they are not best placed to find one and suggest the big financial recruitment consultants would be a better potential source.

They also emphasise the need for someone with an appreciation and knowledge of design. But, they say, the best ones are probably found by word-of-mouth.

Typical finance director responsibilities:

company flotation

company merger, acquisition or alliance

management buyout

company diversification

company and employee taxation

implications of EMU

pension schemes

healthcare schemes

staff recruitment

incentive schemes

share options

set staff salaries

NB A finance director would typically devise strategies to deal with the above issues, which would generally be administrated by an accountant.

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