A finance director ensures that the company’s plans add up in terms of profit, cash and payment dates. Finance director responsibilities include financial planning, organising management accounting, analysing costs and income, managing cash flows and assessing financial risks. The business owner gets a calculation of a decision’s consequences before the company takes on new commitments.
Start with your sales team’s terms of sale. If salespeople are allowed to offer deferred payment, that permission has a limit in days. But is there a limit in roubles — how much money is held by one buyer at any one time? With repeat deliveries, the debt grows before the first payment is due. The customer is not breaking any terms. The business is already allocating more money to them.
Asking the accounts department to monitor overdue payments more carefully is pointless here: nothing is overdue. You need to count the full unpaid amount and upcoming deliveries. I believe it is precisely decisions like these that show why an owner needs a finance director: they connect commercial terms with the company’s ability to sustain them.
What a finance director does
A finance director’s functions cover accounting, planning, cash movements, profitability, financing and financial risks. They organise this work, assign tasks and explain the consequences of each choice to the owner; there is no need for them to enter every payment or prepare every document personally.
For an established business, it helps to describe these responsibilities through six results that should emerge from the work.
- Reliable figures. The finance director sets the rules for management accounting: what counts as revenue, which period costs belong to and where the data comes from. They set deadlines for reports and appoint people responsible for the underlying figures. Any mismatch between a report and a bank statement or accounting system gets an explanation.
- A plan for profit and cash. They connect sales plans with purchasing, hiring and development plans. They calculate what the company will earn and when it will need funds. If sales fall behind, they revise the related costs and forecast, keeping the original plan for comparison.
- A workable payment schedule. They bring together receipts and payments by date, separating confirmed receipts from expectations. They show the day when money will run short and the options available before that day. Any payment postponement must have agreed terms; otherwise, the spreadsheet simply hides a failure to meet a commitment.
- An explanation of changes in profit. They separate the effects of price, the mix of sales, fulfilment costs and the costs of running the company. A general “we are earning less” becomes an amount for each cause. Ways to calculate these changes are covered in “How to Increase Profit: Price, Costs and Profitable Orders”.
- A calculation of financing needs. They establish how much money is needed for current operations and new projects, for how long and from which source. They compare the cost and terms of the available options and prepare financial data for negotiations. Securing a loan is not a result in itself: the business still has to make the payments on it.
- Limits on financial risk. They propose a limit on each buyer’s debt, a cash reserve and terms for major purchases and investments. They monitor compliance with the agreed rules, examine departures from them and submit exceptions for a decision in advance.
Planning, management accounting, financing and support for decisions are included in ACCA’s description of the CFO role. The exact scope of work in your company needs to be set out separately: the job title does not establish who manages cash and payments, who compiles reports and who speaks to department heads.
How does a finance director differ from a chief accountant?
A chief accountant organises financial and tax accounting and is responsible for correctly recording transactions and preparing mandatory reports within their area of responsibility. A finance director uses business data to plan, choose sources of funding and assess decisions. They work with the same transactions but answer different questions.
| Subject | Accounting task | Finance director’s task |
|---|---|---|
| A buyer has not paid for a delivery | Record the debt and reconcile the accounts | Assess the total debt and decide whether further deliveries on deferred payment terms are acceptable |
| The company buys equipment | Determine how to account for the purchase and related transactions | Compare the investment, future receipts and pressure on cash |
| A department head proposes a new expense | Ensure correct documents and recording of the transaction | Calculate what result would justify the expense and how to pay for it |
| The month has ended | Prepare accounting data and mandatory reports by the set deadlines | Explain departures from the plan and recalculate the next steps |
A capable chief accountant can handle some financial tasks. There is therefore no need to hire a second person just for the job title. First, establish which decisions are already supported by calculations, how much time this takes and what regularly gets overlooked.
Combining the roles requires dedicated time and authority. If a budget, a financial model and bank negotiations are simply added to someone’s existing workload, the owner will have a longer list of expectations. The employee will not have more working hours. The finance director also organises the finance team’s work: deciding which tasks stay with accounting, which go to an analyst and which they handle personally.
Why do deferred payment terms need a limit in roubles?
A deferred payment period limits the time allowed to pay for an individual delivery. A debt limit caps the total amount a buyer owes the company at any one time. Managing cash requires both limits: several deliveries within the permitted payment period add up to one growing debt.
Look at the list of unpaid deliveries to one customer. Alongside it, put the orders already accepted that will require spending before the next payment from that customer arrives. The first list shows today’s debt; the second shows the future pressure on cash. If you only look at overdue invoices, the second list will never enter the discussion about money.
Here, the finance director must connect sales and fulfilment activities. The head of sales provides the terms and expected volume, while production or purchasing provides costs and dates. The finance specialist calculates the cash balance the whole company will have, taking its other commitments into account. This produces the terms for further work with the buyer: the permitted debt, the advance payment amount or the schedule for new deliveries.
Banning all deferred payment is easier than calculating its effect. But payment terms are among the things a buyer considers. Tightening them can cost the company profitable sales, so the finance specialist’s task is to propose terms that allow those sales to be retained. Extending the payment period ties up money in debt; ACCA’s article on working capital examines this relationship.
A working rule to discuss with the team looks like this: “Payment may be deferred up to the agreed number of days from the specified event; the buyer’s total debt stays within the set limit in roubles; expected debt after the next delivery is calculated allowing for expected receipts by that delivery date; if the limit is exceeded, new terms are agreed before the order is accepted.” Deliveries already promised are considered separately: an internal limit does not cancel commitments to the customer.
This rule also protects the salesperson. They know in advance what offer they are authorised to make. After agreeing a deal, they do not have to return to the buyer with a demand for money that nobody mentioned yesterday.
How much money does a longer payment period tie up?
With steady sales, extending the payment period by one day adds roughly one day’s sales on those terms to the average amount owed by buyers. An initial estimate is the average amount of those sales per calendar day multiplied by the number of extra days. This is the amount of delayed receipts, not a complete calculation of the loan required.
Take your sales on deferred payment terms for the month. Include only the buyers whose terms you intend to change and the amounts they must pay, including VAT if it forms part of the payment. Exclude prepaid sales and returns.
| Calculation item | Your data |
|---|---|
| Monthly sales under the affected terms | S = monthly sales under these terms, for example 3 million ₽ |
| Calendar days in the month | D = calendar days in the month, for example 30 days |
| Average amount per day | S ÷ D = average sales per day, for example 3 million ₽ ÷ 30 days = 100 thousand ₽ |
| Extension of the payment period | T = extra days of deferred payment, for example 5 days |
| Increase in average debt | S ÷ D × T = increase in average debt, for example 100 thousand ₽ × 5 days = 500 thousand ₽ |
If sales are steady over a 30-day month and you add 5 days to the payment period, the calculation gives S ÷ 6. For example, sales on the changed terms are 3 million ₽: 3 million ₽ ÷ 6 = 500 thousand ₽. Buyers will retain an additional amount equal to a sixth of monthly sales on the changed terms. This is the arithmetic of the chosen terms, not a market benchmark.
The estimate assumes unchanged sales volume, the same extension of the payment period and payment without delays. Large one-off deliveries, seasonal variations or growing volume require specific receipt dates. An additional order will increase the debt beyond the effect of the payment extension itself.
The finance specialist makes the next calculation: they compare the revised receipts with the company’s payments and determine the largest cash shortfall. This takes account of the available balance, suppliers, wages, taxes, debts and the chosen reserve. The increase in debt and the amount of external financing differ because the company covers part of the need with its own funds.
The deal options are then compared. A larger advance payment means less financing is needed. Waiting longer for payment means using money for longer. If borrowing is necessary, the financing cost forms part of the earnings calculation. The owner sees the cost of the commercial concession before deciding on it.
When does a business owner need a finance director?
A finance director is needed when decisions about sales, costs, debts and investments regularly affect one another, and nobody calculates their combined effect. The guide is the complexity and frequency of these decisions; no single revenue figure determines the need for this role.
The signs are visible in everyday work:
- Departments plan their costs separately, and only the owner manages to match them to receipts.
- Before a large order, earnings are calculated, but the amount of money required and how long it will be tied up are only established after the terms are signed.
- The receipts forecast changes, but a purchasing or hiring decision continues to follow the old plan.
- Every need for money is covered by a personal transfer from the owner, with no calculation of when those funds will return.
- The company regularly chooses between several investments but compares them using different periods and different sets of costs.
A one-off accounting error calls for an accounting correction. A missing report calls for someone who knows how to prepare it. A finance director is needed where the data must regularly be followed by decisions on working terms, agreement with department heads and monitoring of the results. This separates the actual task from the desire to hire the most senior specialist just in case.
If the task is already ongoing but there is not yet enough work for a full-time role, RENTROP offers an outsourced finance director: an experienced specialist works within the client’s team, their fee is tied to performance targets for net profit, and you can start with part of a working day. It begins with a free trial lasting 7 days; data, systems and access remain within the business.
Which results should you use to assess a finance director’s work?
A finance director’s work should be assessed by the reliability of calculations, the timeliness of decisions and the financial consequences within their agreed responsibilities. Growth in net profit is considered alongside cash flows and debt: one measure does not explain the cost of achieving the result.
At the start, you need a list of data sources and discrepancies, current commitments and a cash forecast for the upcoming payments. For each gap, there must be a way to obtain the figure, a person responsible and a date. Demanding an exact profit figure immediately when the underlying data is incomplete encourages a confident answer instead of a usable calculation.
In regular work, forecasts are compared with actual results. If a receipt does not arrive, the review should make clear what changed: the fulfilment date, the buyer’s behaviour or the original assumption. The original forecast is kept. Rewriting it after the event to match the bank statement removes the opportunity to assess the quality of planning.
The result of managing deferred payment is visible in a specific order: before it is accepted, the buyer’s expected debt, the company’s cash needs and the agreed terms are known. If the limit constantly has to be exceeded, the finance specialist recalculates its basis and proposes changing the terms or the available funding. Letting exceptions accumulate without comment cancels out the rule.
The buyer who causes the least concern in an overdue payments report can tie up more of your money than anyone else: they pay for old deliveries on time and order new ones. When the head of sales brings in another order like this, the finance director should already have an answer to how much money the company is allocating to that customer. The discussion of finances will then begin with the terms of the sale, before things reach the point of asking the owner to urgently top up the account.