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Non-Executive Director Service

“The best teachers are those who tell you where to look, but they don’t tell you what to see”

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A Non-Exec does not play a hands-on role in the day to day operations of your business. Instead, the Non-Exec plays a more hands-off, more guiding and more of a devil’s advocate role.

Typically, Non-Execs are involved with the client business 1 or 2 days a month or maybe they just attend for the monthly Board Meeting.

The role of the Non-Exec is to support, challenge and generally create debate about key issues within the business. If needed, the Non-Exec will bring structure and discipline to the company’s management information reporting and will bring governance to ensure that every senior manager is held accountable.

Most importantly, the Non-Exec will become a trusted advisor to the CEO and his team. The Non-Exec will use his or her experience to look down the track and see what issues the company may need to face up to in the coming months and years. The Non-Exec will then focus the company on completing those exercises that are most pressing.

A brief range of issues the Non-Exec may discuss:

  • Does the Finance Team service the needs of the business now and is it likely to be adequate for the foreseeable future?
  • Do the current monthly reports highlight the right things?
  • Do we compare current performance with last year’s figures and do we have a budget?
  • How smoothly have recent audits gone and is the business vulnerable to accounting surprises?
  • Are commercial and operational KPIs covering every nook and cranny of the business?
  • Is the Management Information reviewed and acted upon?
  • Are there action plans minutes setting out who is targeted with doing what and by when?
  • Do we have any experience gap in the team? How will we fill that gap?
  • Is the succession plan adequate or does it need developing? What happens if X gets knocked over next week?
  • Is the company’s IT capability adequate?
  • Are the company’s professional advisors able to grow with the company during a period of rapid growth?
  • Is the business over reliant on particular suppliers?
  • Does the supply chain react quickly enough to changes in sales demand?
  • Do we need to bring any products back to in-house manufacture?
  • Would we be better outsourcing certain activities?
  • What percentage of total turnover do key customers represent?
  • Do we know what margin we are making – by sales channel, by customer, by products, by territory? Do we know which areas are improving and which are deteriorating?
  • Are any of our products reaching their end of life and do how strong are our NPD processes?
  • What is the relationship like with our bankers / other funders?
  • Are they happy with the way we manage the relationship – do we need to change anything?
  • Do we have a detailed and reliable cashflow forecasting system? Do we always hit the forecast? Is it used as a vital management tool?
  • Do we have adequate working capital levels and funding for the next three years?
  • Do we have a formal Risk Register? Have we thought through the key risks facing the business and do we have processes in place to mitigate those key risks?
  • Do we have adequate insurance cover in place in the event of a disaster?
When you face a crisis, you know who your true friends are.

FAQs

The Frequently Asked Questions sets out what an interim CFO / FD is, what he/she does, where he/she can add value to your business and how the arrangements for utilising the Interim’s services can be structured.

  • What is an Interim Finance Director?
  • How can I be sure that we will get a return on the cost of the Interim FD?
  • When do companies use an Interim FD?
  • How do I pay the Interim FD?
  • Will you do my year end Accounts and sort the tax out?

An interim Finance Director is a widely experienced accountant and operational manager who provides a short term service that is required by his client. They have the experience and ability to come into your business and hit the ground running.


Generally speaking, Interim CFOs or FDs act through their own Limited Companies and do not come onto your company’s payroll. Consequently, you will not pay employers national insurance and other add on costs and benefits such as a car allowance, employer’s pension contributions, private health insurance etc.


Interim FDs have very often already been through the crisis or project with other businesses. This means that your business does not have to re-invent the wheel. The experience that you buy shortens the path to completing the exercise and increases the likelihood of a very successful outcome.


Interim FDs therefore provide more hands-on and more practical assistance than a Management Consultancy service or Accountancy practice. They tend to deliver solutions rather than talk theory.


Once the project has been completed, the Interim FD will simply move on to the next assignment. There will be no cost to the business to remove the Interim FD. Indeed, you can bring the relationship to an end at any stage that suits you.

You should gain a huge amount of confidence that the Interim FD is right for your business even before the assignment commences. During your initial discussions, the Interim FD should be able to demonstrate practical examples of where he has previously had hands-on experience that matches your requirement.


Once the assignment starts you should be comforted because (1) the Interim FD will hit the ground running and (2) he or she should bring a calm but focused approach to their task. You should see green shoots very early in the assignment because the Interim FD has been there before and done it.


The advantage of using an Interim FD is that you can bring the arrangement to an early close if you feel that it is not progressing to your liking.


The chemistry between the CEO and the Interim FD will be key to ensuring that the project is successfully and smoothly brought to a conclusion on time and within the agreed budget.

Interim FDs are used all the time by businesses that either (1) do not have the relevant skills and experience for the project in-house or (2) have the skills and experience but those heads are currently fully occupied with other priorities.


A business may well have a very capable FD in place but he or she may not have the hands-on experience of dealing with the project in question. In such circumstances, the business has a choice of using an Interim FD to get the job done (while coaching the in-house FD along the way) or - a slower and more risky route – is to let the in-house FD do the work and effectively re-invent the wheel. This is considered to be more risky as the in-house FD could fall into traps that the Interim FD has previously fallen into and would therefore avoid this time around.


The likely scenarios when an interim would be right for you are as follows:



  • You don’t have the experience in house

  • Your own FD is otherwise engaged

  • You want the Interim to mentor / coach the in-house FD

  • You want to cover sickness or maternity leave

  • You want to replace an under-performing FD

  • Your business has simply outgrown the current FD

  • You want to cover for a FD who has handed in his or her resignation

  • Your business has grown to the stage where you feel it might be right to bring in your first FD


The kinds of assignments that you may need assistance with include:



  • Buying or selling a business

  • Preparing a business for sale

  • Preparing a business for future investment (Private Equity, Angel Investors, Flotation)

  • Reorganising or restructuring a business (or group of businesses)

  • Completing a health check of the business and identifying risks and opportunities and areas where profits can be improved

  • Preparation of a 3 or 5 year plan with integrated financial forecasts

  • Cashflow forecasting by the day, week, month or the next twelve months

  • Closing, relocating or expanding manufacturing activities

  • Financial modelling - maybe new shift patterns, maybe new business streams, maybe supply chain forecasting

  • New IT developments (full systems implementations or departmental developments)

  • Acting as your first FD – developing appropriate controls, reports,

  • Professionalising current financial controls and financial reporting systems

  • Developing much more sophisticated budgeting systems that can be used to monitor progress in all areas of the business

  • Improving the financial awareness of non-financial staff, improving the business awareness of your finance staff

  • Improving working capital management systems and generate cash as a result

  • To prepare plans for approaching potential funders

  • To renew and/or re-finance existing bank facilities

  • To investigate unexpected figures / losses in the monthly accounts

  • To improve awareness of where margin is coming from (and where there are lost margin opportunities) ie margin reporting by division, by territory, by customer, by product

  • To improve the profile of your stockholding and identify which products are overstocked and which products are understocked

  • Change Management initiatives – help with changing under performing parts of your business or painting a vision of where the business is going and how it is going to get there

The interim FD generally works through his or her own Limited Company. The become a supplier to the company just like a solicitor or your auditors.


A daily fee is agreed and, depending on the nature of the assignment, sometimes a success fee is agreed if the assignment is completed successfully to the satisfaction of the company (eg - sale of a business). The interim FD will present a formal invoice and this would be paid on agreed terms such as 7 days from the date of the invoice.


The interim FD will not invoice the company if he or she does not work (eg bank holidays and sickness). In other words, they are not an employee of the business.


The daily fee payable to the Interim FD should be the equivalent to the total cost of employing an in-house FD. In other words, the daily rate agreed is not comparable to the daily salary of an in-house FD. With an employed FD, as well as the salary you would pay for holidays, bonuses, car allowances, pension contributions, healthcare insurance, employers NIC etc.


It is sensible for a Letter of Engagement to be issued if the Interim FD is contracting directly with the company. This L of E sets out what the objective of the exercise is and over what timescale. It ensures that both parties are on the same page.


Sometimes the Interim FD has been introduced via a third party (such as a recruitment agency) and then the contract is between the Recruitment Agency and the Company. In such circumstances, the recruitment agency will invoice the company and the Interim FD will invoice the Recruitment Agency.


Many Interim FDs will be insured under a Professional Indemnity insurance policy. This should give the company comfort that they are protected if the Interim FD is negligent.

The Interim FD is not an accountancy practice and is usually not a tax specialist. They are therefore not the best option for these kinds of services. An accountancy practice is not the best option to gain the true commercial insight of an experienced Interim FD. Conversely, the Interim FD is not the right go-to option for your year end compliance activities.

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Les Thomas FCA, MBA
Email: info@538.org.uk
Telephone: 07977 485726

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