Often thought of as a bean counter, in reality, the role of a modern finance director is much bigger. Finance directors are a key strategic player for businesses, driving business growth and performance through data-led decisions.
Though of course the unique needs of the role will vary by industry and business, we’ll be looking at the key FD responsibilities to answer the question, “what does a finance director do?”
What are the Finance Director’s Roles and Responsibilities?
Broadly speaking, the new finance director role includes the following:
- Finance, legal and administration compliance
- Overall responsibility for the finance department
- Managing relations with external investors
- Leading financial reporting
- Developing and implementing the company’s financial strategy
- Overall responsibility for all taxation
- Oversight on operations, HR, IT departments
- Acting as a trusted business partner and key strategic advisor to the CEO and wider board of directors
- Developing and implementing a robust financial control framework
- Helping drive business growth and performance
We’ll look at all these responsibilities in more depth.
Finance, Legal and Administration Compliance
In an increasingly globalised world, businesses face a range of regulations and laws they must comply with to avoid fines and worse. The finance director ensures the business is aware of and complies with any regulatory requirements.
With a larger team, this may be delegated to others within the wider finance team, but the FD is the person ultimately responsible for all financial and legal compliance.
Overall Responsibility for the Finance Department
For SMEs, your finance department may consist of just one FD. But in larger international companies, finance departments are huge and may span across several offices.
It is the responsibility of the FD to coordinate all finance teams. How this looks in each business will look very different, for some it could be as simple as delegating and overseeing tasks like monthly reporting and payroll, while for others it could include ensuring the alignment and coordination of many financial departments with overall business strategy.
Managing Relations with External Investors
Businesses may have many external investors, whether that be the bank or private investors. The financial director is responsible for ensuring these investors are up to date with the financial health of the company, as well as managing payouts to these investors.
For example, for some companies it will involve sending out quarterly communications to investors, while for others more developed relationships with regular contact is the norm.
Leading Financial Reporting
Whether it’s monthly, quarterly or annually, every business has financial reporting needs. The financial director is responsible for developing, implementing and overseeing the financial reporting process for the business. This includes all aspects of reporting such as income statements, cash flow reports, balance sheets as well as budgeting and forecasting.
Developing and Implementing the Financial Strategy
The finance director is responsible for developing and implementing the financial strategy.
For some businesses, this means it is the FDs responsibility to develop a plan that outlines how a business will finance operations that allows them to meet business growth goals. In other businesses, the FD takes more of a strategic lead in developing a financial strategy with more innovation through their unique insight into areas of the business where improvements could be made.
Overall Responsibility for all Taxation
The financial director may not deal with the nitty gritty paperwork of taxation, but they have the ultimate responsibility for ensuring the company meets their taxation requirements. They may be the lead contact for HMRC and ensure the business is providing accurate reporting of finances.
Oversight on Operations, HR and IT Departments
How much the financial director is involved with various other departments throughout the business will depend on the unique structure of that business. In general, the more involved a financial director is with each department, the better they can strategise that department’s performance.
As a minimum, finance directors tend to be involved with the financial aspects of business operations. This ensures they’re aware of the costs involved in any processes, so they can advise on areas for improvement.
For other businesses, it’s common for the finance director to have a strong relationship and communications with the HR lead. This allows the business to best strategise human resource management finance needs to allow them to recruit, retain and engage the best talent and teams.
IT departments are often more involved with the finance officer than other departments due to their funding needs. For example, IT departments tend to need financing for systems and outsourcing. The finance director can work closely with the IT leadership to ensure the business is using the most efficient and cost effective systems, aligned with wider business goals.
Acting as a Trusted Business Partner and Key Strategic Advisor
One of the most important responsibilities of the finance director is to advise, and often strategise, with the CEO and wider board of directors. This includes attending and contributing to board meetings and advising on strategic decision making.
As above, how this looks for each business will vary. Many financial directors serve the purpose of informing the board of directors of the financial viability of business strategies. While others take a more active role in researching, developing and implementing new revenue streams alongside the CEO or board of directors.
Developing and Implementing a Robust Financial Control Framework
The finance director is responsible for developing a robust fiduciary framework in order to minimise risk throughout the company. These procedures and policies allow businesses to monitor and control the allocation of financial resources to maximise business resilience and operational efficiency.
Driving Business Growth and Performance
Ultimately, through the above responsibilities, the finance director is largely responsible for driving business growth and performance. Their analytical skills combined with a deep understanding of the company’s finances allow them to develop financial strategies that align with business growth goals.