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In many SMEs, the finance function simply doesn’t deliver the information the business needs. As a result, critical decisions are made on gut feeling, leading to a higher risk of failure, argues Fred Edwards, managing director of myFD.

Over the past six years, I’ve taken a close look at nearly 150 growing businesses. I’ve noted that finance teams are rarely located at the heart of the business, working closely with their colleagues. They are more likely to be out of the way, even in another building at one company I met. That is often the accountants’ preference and their door will be firmly closed to visitors.

At one manufacturing business with a turnover of £3 million, the accounts department was run by a ‘qualified-by-experience’ (in other words unqualified) finance controller (FC). She posted notices on the office door stating ‘Accounts office opens at 10.30am’ or ‘We’re running the payroll, do not disturb’, yet complained that nobody told her anything and that she was constantly interrupted.

The problem lay in the different expectations of the finance role around the business. The FC wanted to be head-down, processing data. The managers wanted to get product shipped on time. With no finance director (FD), the managers assumed that the FC knew what she was doing ‘because she’s always done it’. But there was no clear job description, no timetable and no understanding that the work of the finance team failed to meet the needs of the business.

The trouble is, accountants won’t naturally engage with the rest of the business and proactively ask what’s happening. They hate being disturbed in their work, which they see as confidential, communicating mostly via email rather than picking up the phone or going to see someone.

The results are often, quite simply, rubbish. I recently spoke to an MD who looks at the gross profit percentage first, because it is always wrong. I diagnosed that as resulting from a lack of process to ensure consistency of supplier invoice processing with the stock records.

Accountancy training doesn’t help because it focuses on technical and statutory matters, rather than how financial information is used as a tool to help people make decisions.

The key question owner-managers need to ask themselves is how closely their finance function is integrated into their business – physically, operationally and culturally. If it isn’t on the same wavelength as the rest of the company, then it stands little chance of producing timely, accurate and, above all, relevant information.

Here are my five top tips for making sure your finance team delivers what you need:

1. Re-site the finance team so that they can see and be seen by the rest of the business. They will complain but that’s tough

2. Look at the main processes – particularly sales invoicing and cash control – to see how often the same data is keyed in. If it’s more than once, the chances are the accounting system is not being used to its full potential

3. Commit to regular management meetings to discuss the results and set a timetable for the production of information

4. If the numbers are always wrong, for the same reason, you have a training issue, or worse, a lack of fundamental competency. You may need to replace your accountant with someone qualified who knows what they are doing

5. Don’t try to be MD and FD at the same time – there is an inherent conflict in the nature of the roles. Even if you are a trained accountant, as MD your time is better spent building the business.

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