The rise of the portfolio and interim finance director

Whilst the role of interim and portfolio finance directors is not new in itself, it is a trend which has grown over the last few years.

Research from IMA, published earlier in the year, indicates that interim finance director roles increased 23% between 2013 and 2014. Additionally, it is estimated that the total size of this market will grow to £2 billion in assignment fees by the end of 2015. This increasing demand is predominantly due to economic and technological changes.

Portfolio and interim finance director roles vary enormously. Their scope ranges from fulfilling a permanent short term engagement on a project basis through to a part time flexible working arrangement during which the finance professional will work for a number of different companies for a few days or weeks a month. The latter is referred to as a portfolio finance director, and is more strategic.

These non-typical engagements are becoming more popular with businesses as companies need access to different expertise at different times during their life cycle. For example, the skill set associated with an early stage company of a finance professional setting up processes and controls is very different to that of a larger later stage company seeking access to finance. Such engagements have benefits for both companies and finance directors. The main benefit of this for companies is that they can access talent on demand to match their business needs. Comparatively, finance professionals seeking an interim or portfolio finance director career are able to recycle knowledge from prior experience, alongside being able to sharpen their skillset by being involved in a number of different businesses.

Why are they becoming more popular?

Part time finance directors are becoming more popular for a number of different reasons, primarily related to the economic environment and technology. Since the financial crash in 2008 companies have been put under pressure to cut costs, and in some cases to put turnaround plans in place. Additionally, the fall out from the recession has resulted in record levels of new business creation. Research from UHY Hacker Young shows that the UK has seen a 51% increase in the number of new businesses in the last five years from 385,741 to 581,173.

Strategic financial advice is crucial for new businesses due to cash flow being one of the main reasons for them failing. Additionally, new businesses are often constrained by cash due to startup costs. Finance directors can help out such companies with relatively simple tasks such as cash flow, budget planning and establishing and managing PAYE schemes. It makes sense to hire a part time finance director as they cannot necessarily afford the cost of taking them on full-time. This arrangement can either take the form of the finance director completing all of the related tasks in person during a few days/week a month or tending to some of them remotely. It is possible that having a flexible working arrangement, allowing the finance director to work from home, could result in reduced costs.

Flexible working has also been aided by increasing adoption of communication tools like Skype and cloud accounting software. This allows finance directors to communicate in real time with senior management, alongside being able to view the same set of live financial and accounting data.

Numitas

Chris Chapman, Managing Partner of Numitas LLP, a professional practice of CFOs and FDs, which work with a variety of different types of business including technology, architects and financial services says:

“Online tools not only make it easier to work remotely, they also enable greater efficiency as we are able to service clients without losing time through travelling, it also affords us greater opportunity to provide a resource that is best suited to the client. The right skill set may be farther away than very frequent travel makes practicable.”

He also cites cloud software as a productivity tool for his own team by reducing travelling time for partners and associates.

Numitas’s service differs from typical outsourced and interim engagements as their offering is highly consultative, and consists of finance directors working with companies on a project or secondment basis. Roles are wide ranging and include raising investment, developing international growth strategies and planning for a public market listing.

The company is able to be at the heart of the finance community by putting on their own network of CFO clubs, and it is here where most of their team is drawn.

Another way for finance directors to find out about assignments is through their own personal network.

The Finance Foundry

Guy Hutchinson, founder of The Finance Foundry, a professional services provider working with a number of well-known London best start-ups and growth stage businesses says:

“Take on a client through your personal network and do an amazing job working with them, and the client will then come and find you.”

He lists the distinction between part time finance and outsourced finance directors as the former being more consultancy based, with the latter being more functional and related to compliance. The type of assignments which the Finance Foundry takes on are more at the more strategic end, with Hutchinson listing this service as being “pure value add” and the company’s “core competency.”

Hutchinson tends to work between four to eight days a month with each of his clients, and allocates a greater proportion of his time on clients who are currently working on a funding round, strategic planning or analysis.

He believes that the demand for outsourced finance directors will develop inline with the growth of new businesses creation in the UK.

Additionally, the demand for all types of finance directors is likely to grow due to the UK now having a record number of 5.4 million businesses currently operating. If you are considering a career as an outsourced finance director, there has never been a better time to give it ago.

Nick Levine is a chartered accountant and freelance journalist, with a background in fin-tech who has written for Accounting Technician magazine.