The SME Environment

SMEs, being small, don't have complex layers of management. Compared with a larger business, people are dealing much more closely with suppliers and customers each day. At larger firms, there are plenty of people who deal with neither. Businesses invent concepts like "internal customers" to bring concepts of customer service and accountability into internal functions.

Large firms have conscious systems to get people to work together; they can't rely on our natural organising skills (after all, evolution prepared us to co-operate in small bands of maybe 100 individuals).  Systems means formal ways of doing things: standard form, rules about who reports to whom, etc.

Larger companies need to encourage initiative and alignment through reporting systems, bonuses, training, "mission statements", company newsletters and balanced scorecards. A lot of management effort goes into giving people the insight and tools to make good decisions. Many SMEs do without this because the decision makers, possibly only two or three, can cope with the scale of the business with little management effort. Hence the traditional role of finance is to keep score, more or less on the sidelines.

But as a business grows, methods that worked when a couple of decision makers could immediately talk to everyone begin to struggle. Control over cash is the first warning sign: stock grows out of control, there is a loss of discipline over collections and customer credit control ... small business accountants see this every day. However, valuable information also gets lost. Information that holds the key to future profitable growth. A growing business is not just the time to phase in more formal financial control tools, but also the time to upgrade the quality of decision support provided by finance: this is the theme of these articles. 

In this article, I will discuss people aspects of a transformed finance team: a team which combines finance techniques and world view with insights about the business, helping the business make better decisions.


The transformed Finance team starts from fundamental finance capabilities: the ability to work with numbers, accounting systems and analytical tools like Excel, the ability to understand book keeping and accounting principles, a commitment to accuracy and safeguarding assets. I will take this as the starting point.

The first step in upgrading the team's contribution is to build awareness of the financial performance of the business. Everyone in the team must be comfortable with understanding basic financial statements. I particularly look for an understanding of the key reconciliation points going from the P&L to the cash-flow to the balance sheet. I present the financials to the team and encourage discussion. This should include recent trends and some ratios like days sales outstanding, and bank covenant KPIs. This may already be a change. The SME owners may find it confronting. A key part of the transformation is increased openness about business performance. Of course, it's very hard to keep financial information away from the finance team; better that they understand and can raise questions openly.

Next, we need to increase engagement with the business. The finance team needs some people who are deeply interested in the business, have the communication skills to be understood and the ability to connect "gaps and opportunities". These are the SAS people: you can drop them into rough terrain, and know they have the awareness to detect when there is something happening they need to know about, and the initiative to investigate further. People who will make decisions with an understanding of how they affect the performance of the business. To influence the business, finance needs to have these capabilities.

A couple of points to bear in mind as you read this: a traditional SME finance team doesn't fill this role, but that doesn't mean the capabilities aren't there. Also, once team size gets about five or six, you should deliberately strive for a mix of capabilities and styles in your team. In a team of that size, I would say you need two people who are capable of working independently in the business. Your test of that is: can you assign them to a project team anywhere in the business? In Australian Football terms, these are your midfielders: players who roam between defence and attack, are capable of fighting hard to get the ball and moments later running into space with initiative, linking team mates to move the ball rapidly. These people take the analytical approach that is a key value of finance, and fuse that with an understanding of business processes.

Also, I don't expect that you go and hire these people from the market. If only SMEs had the money! Doing so is expensive, it would disturb the salary scheme and you may have trouble attracting high fliers to your SME.But it is also more fun as a leader to find and develop people, it is very motivating for the person and for the team. In my experience of working with teams all around the world, often in low profile, out of the way organisations (factories in rural France and Poland, for example), these capabilities exist, if you look hard enough. You won't find someone ready to be a star on day one, but you will probably find potential. As well, the points below help when recruiting.

The indicators that someone has these capabilities are

* a desire to learn. Someone who is studying, keen to ask questions, interested in customers and suppliers.

* a people person, interested in what people are doing

* likes explaining

* interested in how information and analysis is used

* reality checks numbers, understands when something makes sense in the real world.

* is confident about estimating and making approximations

* instinctively treats phone calls from customers as a priority, and doesn't volunteer that the customer is talking "merely" to Finance, but instead focuses on helping the customer or quickly handing the call over to someone who can help. Handing over does not mean simply forwarding the call.

* Time management: Peter Drucker has a wonderful quote about time: a resource that you can't buy, produce, borrow or store. Prioritisation is the key. People show this in many ways: someone who has kids, or is studying while working, will be good at this.

Team Balance

The stereotype of a traditional finance team of "bean counters". We hear that term a lot; it refers to accountants who go to extreme attention to detail, are very thorough and rules based, reliable in completing routine tasks with accuracy.  Let's play along with the joke and assume that was true before you began the transformation, and let's say you recruit or develop two or three people into the midfielder role I describe above. The reliable, safe pair of hands becomes really important, because you can not leave behind the key requirement of finance to be accurate, reliable and predictable in core responsibilities. In a small team aim for one or two "anchors", and this person needs to be a first class reliable and steady person. The person may not have flair, but they are motivated and passionate about the accuracy of their work, and proud of their personal brand. You need a bean counter or two, but make sure they are exceptional and independent at it, because you don't want to feel the need to check their work all the time.

Flexibility and empowerment: the leadership role

Leadership in a finance team should be more guiding than controlling. Firstly, as CFO you will rely on the judgement of your people to enforce business controls and raise concerns. If you take away initiative, you risk dulling judgement and a feeling of ownership; if people feel personally accountable and responsible, they will present you with finished product. My theory is that you need to let people define how they will meet an objective, don't tell them how to do it. In the process of working this out, they grow their own ownership of the task. For me, this is a general principle, at home, in volunteer roles and at work. It's also my personal style, and I know there are a lot of different personal styles which also work. This implies trust and information openness.

Development and alignment

Almost everyone likes learning new skills and improving. I'm regarded as a "teacher" by my teams: this is great, since people who learn are (a) getting better and more productive and (b), working with pride. I think there is a place for formal development planning in SMEs. This means sitting down regularly, setting goals and giving people the chance to learn new skills.

I've simplified an idea taken from my time at Philips, and linked each job description to my four pillars of the finance function; aligning the individual with the team. I then sketch out my expectations of the contribution to each of those four areas. I also think it is useful to give guidance about the performance of the next level. Finally, I add some content about leadership competences. Like all frameworks, this makes development plans easy to discuss.

It looks like this:

(this is a partial extract from a job description)

Key responsibilities

The accountant works under the direction of the CFO, and tasks and priorities will vary over time.

Specifically, some key tasks are:

  • Designing and maintaining record keeping systems for source documents
  • Advanced GL journal entries
  • Supervision of monthly closing
  • Bank reconciliation supervision
  • Supervision of cost price and gross margin accuracy
  • Business contact for external payroll

In general, the accountant will closely support the CFO in execution of the finance department’s mission, which is

  • Business control
  • Process efficiency and innovation
  • Decision support and analysis
  • Business optimisation

In addition, some leadership competences are

  • Team leadership
  • Cross-functional co-operation
  • Shareholder and lender relations

The Accountant is expected to be a significant contributor in the first two areas and competent in the third and fourth area.


Good performance

Excellent performance

Next Level: Financial Controller

Finance Mission

Business control


Senior Associate+


Process efficiency and innvoation


Senior Associate+


Decision support and analysis


Senior Associate+


Business cash flow optimisation


Senior Associate+


Business leadership

Team leadership




Cross functional co-operation




Shareholder and lender relations




Performance levels



Associate: Knows the basics, executes tasks under supervision,

Senior Associate: Strong subject knowledge, takes a project definition and turns into tasks, delegates to others.

Manager: Very strong subject knowledge, identifies opportunities and risks, teaches others, organises teams. Identifies skill weaknesses in others and adapts allocation of tasks in accordance. Helps other members of the finance team build skills. Helps other members of the finance team improve their contribution to the team’s mission.

Leader: respected in the management team as an authority. Develops other people, makes recruitment and staffing decisions. Able to work as a peer with other functions, and able to represent shareholder interests when dealing with banks and other external parties. Inspires confidence from the owner of the business. Motivation and inspirational to the team.

Development Path for this position

This position should be held by someone with the potential to succeed to a financial controller role, which includes responsibility for a team.

The key skills required for the next step are people management and  development, confidence explaining results to managers and external parties.

Full CPA status is also a requirement to take the next step.

... extract ends

So you can see that this give guidance about how to perform at a high level, and gives a framework for a development plan (for example, my accountant needs to develop team management skills, and should commence getting CPA status. I also like this approach since it ties expectations back to the big picture. My list of tasks is not very exhaustive, and it shouldn't be for a knowledge worker.

Managing performance

I'm going to refer to a valuable resource which is useful and relevant to SMEs. He has a kit This book and its processes are practical and down to earth.