Financial Support for Business Owners – Defining Your Advisory Role
Clarifying Financial Roles for SME Clients
Clear communication and understanding of financial roles are essential for fostering effective partnerships between SME owners and their financial advisors. However, a common challenge emerges when business owners hold misconceptions about the scope and responsibilities of various financial positions. These misunderstandings can lead to mismatched expectations, inefficient practices, potential scope creep, and ultimately, a strained client-advisor relationship.
As part of the VFD Mastermind programme, this guide is crafted to equip you, the accountant, with insights into the typical misconceptions SME owners have about financial roles. Our goal is to help you clearly communicate the distinct responsibilities and limits of each financial role to your clients. By clarifying these roles, you can set realistic expectations, enhance your advisory impact, and steer your clients towards more strategic and informed financial decisions.
Understanding these common misconceptions will not only improve your interactions with clients but also enable you to better define your advisory role, ensuring that your expertise aligns effectively with the needs of the business. This guide serves as a tool to help bridge the gap between what SME owners believe financial professionals do and what they actually do, fostering stronger, more productive relationships.
Here are some key questions you should consider to help define your role and clarify the scope of services for your clients:
- What are the specific financial needs of my client?
Understand the unique aspects of the client’s business that influence their financial requirements, such as industry, size, and growth stage. - How well does my client understand the roles of different financial professionals?
Gauge the client’s current understanding to tailor your explanations and ensure they have realistic expectations of what each financial role can provide. - What financial management gaps can I identify in my client’s business?
Look for deficiencies in their current financial processes that you could address, enhancing their overall financial health and compliance. - Am I clearly communicating the scope of my services?
Consider if you are effectively conveying what services you provide, what you don’t, and how you differ from other financial roles like bookkeepers or financial controllers. - How can I add value beyond traditional accounting and compliance services?
Think about additional services or advice you can offer, such as strategic planning, financial forecasting, or business advisory, that go beyond compliance and contribute directly to the client’s business success. - What are my client’s long-term financial and business goals, and how can I align my services with these goals?
Understand the client’s long-term objectives to ensure your financial advice supports their broader business strategy. - How can I proactively address potential financial challenges before they become issues for my client?
Identify potential financial risks or upcoming challenges and discuss these with the client ahead of time to prepare and plan effectively. - Am I using the best tools and technologies to provide my services efficiently and accurately?
Evaluate if you are leveraging the most effective tools that could enhance your service delivery, such as cloud-based accounting platforms or analytical tools. - How can I foster a relationship that positions me as a trusted advisor rather than just a service provider?
Think about ways to deepen your client relationships, possibly through regular financial health check-ups, educational sessions, or by being accessible for consultations on financial decisions. - Am I staying updated with the latest regulations and industry trends affecting my clients?
Ensure you are continually learning and staying abreast of changes in regulations, financial practices, and industry trends to provide informed and up-to-date advice.
By considering these questions, you can better define your roles, set clear expectations with clients, and enhance your effectiveness as trusted financial advisors.
Understanding Financial Roles: Perspectives of UK SME Business Owners
Bridging the gap between perception and reality for most SME business owners.
Role | Perceived Role | Actual Role |
Bookkeeper | Some business owners underestimate the role of a bookkeeper, considering it as merely handling invoices or basic data entry. | Bookkeepers maintain detailed records of all financial transactions, manage payroll, and ensure that financial records are up-to-date and accurately reflect the business’s financial status. They are foundational to effective financial management and preliminary reporting. |
Accountant | Many SME owners believe that their accountant handles all aspects of finance, from daily bookkeeping to strategic financial planning and tax handling. | While accountants play a crucial role in financial compliance, tax filing, and strategic advice, they typically do not manage daily financial transactions or conduct regular internal audits. They focus on broader financial reporting, compliance, and strategic tax planning. |
Financial Controller | Often, SME owners are not fully aware of the role of a financial controller, sometimes confusing it with that of a bookkeeper or assuming it is redundant in a small setup. | A financial controller provides comprehensive oversight of a company’s accounting functions, enhances financial integrity through internal controls, and manages budgets. They play a key role in ensuring that financial practices support the broader business objectives. |
Financial Director | Business owners might think a financial director is only necessary in larger companies or that they only deal with securing funds and managing investments. | Even in SMEs, a financial director is crucial for strategic financial planning and risk management. They oversee the financial health of the company, guide major financial decisions, through the preparation and management of forecasts and budgets they align financial strategies with business goals. |
Key Responsibilities of each role
Use this as a start point to review how you would define your role with clients.
Role: Bookkeeper (often outsourced, can be internal)
- Recording financial transactions (invoices, payments, receipts)
- Reconciling sales and bank accounts
- Managing payroll and maintaining ledgers
- Preparing preliminary financial statements
- Processing payroll and ensuring accurate deductions and payments
- Submitting VAT returns under the guidance of an accountant
Role: Accountant (typically external to the business)
- Financial reporting and compliance (tax filing, financial statements)
- Financial advising and planning
- Auditing and assurance services
- Strategic financial analysis
- Handling VAT returns and compliance
- Strategic tax planning including corporate tax and capital gains
Role: Financial Controller (Usually part-time in SMEs)
- Oversight of accounting operations
- Budget management and variance analysis
- Internal financial controls and audits
- Supervising and reviewing payroll processing
- Preparing detailed financial reports
- Ensuring VAT compliance and effective record-keeping for financial audits
Role: Financial Director (Usually part-time in SMEs)
- Preparing forecasts and budgets
- Strategic financial planning
- Managing financial risks
- Capital structure management
- Key decision-maker in financial investments and long-term business planning
- Oversight of financial compliance including VAT and other taxes
- Ensuring that payroll is processed correctly and aligns with strategic financial goals
How could you develop this part of your overall proposition
The table below outlines the benefits and downsides of having (or not having) each financial role in an SME, focusing on the expertise each role brings and the potential business impact.
Role | Benefits of having | Downsides of not having |
Bookkeeper | Keeps accurate and up-to-date records of financial transactions, essential for compliance and analysis.
Manages day-to-day financial tasks, freeing up time for strategic decision-making.
Supports other financial roles by preparing preliminary financial statements and managing payroll. | Poor financial record keeping leading to operational inefficiencies and errors in financial reporting.
Impacts strategic decision making due to inability to relay on financial reporting.
Increased workload on other staff or roles, potentially leading to mistakes and oversight.
Strain on business operations due to lack of organised financial documentation. |
Accountant | Ensures compliance with tax laws and financial regulations.
Provides strategic financial advice to optimise profitability and growth.
Professional handling of complex financial issues such as audits and strategic tax planning. | Increased risk of financial mismanagement and non-compliance with tax obligations.
Missed opportunities for tax savings and strategic financial planning.
Potential for financial errors and lack of insight into financial health. |
Financial Controller | Provides high-level financial oversight ensuring effective budget management and internal controls.
Responsible for reporting against forecasts and budget, aiding in strategic planning.
Enhances financial integrity and stability through rigorous internal audits and compliance checks. | Lack of control over financial processes, which can lead to fraud or financial discrepancies.
Difficulty in making informed decisions due to lack of detailed financial insights.
Increased financial risks and potential compliance issues without expert oversight. |
Financial Director | Leads strategic financial planning (budgeting / forecasting) and risk management, crucial for long-term success.
Manages capital structure and oversees significant financial transactions and investments.
Ensures alignment of financial and operational goals to drive growth and efficiency. | Without this role, the company may face misaligned financial strategies and higher risk exposure.
Potential underutilisation of financial resources and missed investment opportunities.
Strategic disconnect between operational capabilities and financial planning.
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