How to evaluate your Finance Function

Most CEOs and business owners form a view of their finance function’s performance based on a single indicator: whether the management accounts arrive on time. This is an important indicator but a narrow one. A finance function can produce management accounts within five working days of month-end every month and still be failing on its broader responsibilities — missing early warning signals on cash flow, producing technically flawed statutory accounts, leaving controls gaps that create financial risk, or failing to provide the commercial analysis the business needs to make better decisions.

This guide provides a structured diagnostic framework for CEOs, owners and Finance Directors who want to assess whether their finance function is performing at the level the business needs. It covers the eight dimensions of finance function performance that matter most, the indicators that signal strength or weakness in each, a cost cross-check and the actions that follow from an honest assessment. It is the same exercise as the diagnosis phase of our finance transformation roadmap, and is often the starting point for one.

Why Finance Function Assessment Is Difficult from the Inside

Assessing your own finance function is genuinely difficult. The CEO or owner who is not a qualified finance professional typically lacks the technical framework to distinguish between a finance function that is performing well and one that is merely performing adequately — the management accounts arrive on time, the external accountant does not raise obvious concerns, and nothing has gone wrong. The absence of visible failure is easily mistaken for strong performance.

The second difficulty is that the Finance Manager or Financial Controller responsible for the function has an obvious interest in presenting it favourably. This is not necessarily dishonest — most finance professionals genuinely believe their function is performing well, and many are right. But the FC who tells the CEO that the accounts, controls and team are as good as they need to be is not in a neutral position.

The solution is to use a structured diagnostic framework covering the dimensions most relevant to the business at its current stage, and to obtain at least one external perspective — from the external auditor, from a fractional FD, or from a specialist finance recruiter who sees comparable finance functions — to supplement the internal assessment.

The Eight Dimensions of Finance Function Performance

1. Close Quality and Timeliness

The management accounts are the primary output of the finance function and the clearest indicator of its technical performance, covering both close speed and accuracy. Assess: how many working days after month-end are the management accounts produced, and is that consistent month to month? Do they include a prior-year comparative and a budget comparison? Is there a written commentary that explains performance in commercial terms? Are the balance sheet reconciliations completed as part of the close, with all material reconciling items explained? How often are figures restated the following month?

Strong performance: management accounts produced within five to eight working days, consistently, with prior-year and budget comparatives, a clear written commentary and a fully reconciled balance sheet; post-close adjustments are rare and small. Weak performance: management accounts taking more than twelve working days; significant variation in close time; no or minimal commentary; reconciliations not completed monthly or containing unexplained items that carry over for months. Our month-end close speed benchmark report sets out what comparable businesses achieve, and our guide to management reporting that gets read covers commentary and pack design.

2. Cash Flow Forecasting

Cash flow forecasting is often the first capability to fail in a business under financial pressure — precisely when it is most needed. Assess: does the finance function produce a rolling cash flow forecast, and how far forward does it look? Does it show inflows and outflows weekly for at least the next four to six weeks, so cash pressure is identified before it becomes critical? How accurate has it been against actuals?

Strong performance: a rolling thirteen-week cash flow forecast updated weekly, typically accurate within 5–10% on a four-week horizon, with surprises flagged by finance before they reach the CEO or bank. Weak performance: no rolling forecast; the monthly P&L used as a proxy for cash; cash surprises discovered late and communicated reactively. Our guide to building a 13-week cash flow forecast explains the method.

3. Financial Controls

Financial controls prevent errors, detect fraud and ensure that the financial records accurately reflect the transactions of the business. They include: segregation of duties (different people authorise, process and reconcile transactions); payment authorisation limits and dual approval above a threshold; purchase order matching; payroll reconciliation; and bank reconciliations reviewed by someone other than the person who processes transactions.

Strong performance: a documented control framework covering the key transaction types; segregation of duties for payments; bank reconciliations reviewed by a senior person; payroll reconciled monthly. Weak performance: one person authorises and processes payments without secondary review; bank reconciliations irregular or self-reviewed; no documented framework; control gaps from audit management letters left unaddressed. Our guide to designing financial controls covers what a proportionate framework looks like.

4. Statutory Accounts and Audit Management

The annual statutory accounts, and the audit where one is required, are the most technically demanding outputs of the finance function. Assess: are the statutory accounts filed on time? Does the audit management letter contain material control or accounting weaknesses? Has the audit been taking longer each year? Are the accounts technically accurate under FRS 102 or IFRS, including the disclosures required for the entity type? The Financial Reporting Council publishes the UK accounting and auditing standards against which this is judged.

Strong performance: statutory accounts filed within three to four months of year-end; clean audit opinion; management letter containing only minor points; fieldwork completed within four to six weeks. Weak performance: accounts filed close to the nine-month deadline for private companies at Companies House; a qualified or modified audit opinion; a management letter with material control weaknesses or auditor-required adjustments. Our guide to managing the year-end audit relationship covers how a strong FC runs the audit.

5. Commercial Financial Analysis

Beyond the monthly management accounts, the finance function should produce the commercial analysis that supports management decisions. Assess: when a significant decision is being made — a product launch, a market expansion, an acquisition, a pricing change — does finance provide modelling that quantifies the impact and the risks? Does the management team use that analysis to inform decisions, or decide first and ask finance to confirm the numbers afterwards?

Strong performance: finance proactively provides analysis for commercial decisions; the management team habitually uses it; budget and forecast reflect the commercial strategy. Weak performance: historical reporting only; decisions made without financial modelling; the budget prepared as a projection of last year rather than a financial translation of strategy.

6. Team Capability and Development

The finance team’s collective capability — the qualifications, experience and development of the people in it — is the primary determinant of performance over the medium term. Assess: are qualifications appropriate for the scope of each role? Are team members developing — progressing toward qualification, taking on increasing scope? Is turnover in the finance team higher than in the rest of the business?

Strong performance: the senior finance professional (FC or above) is ACA, ACCA or CIMA-qualified; team members below FC level are studying or have studied; turnover at or below the business average; the FC gives structured feedback and has a view of each person’s development. Weak performance: the senior finance professional is not professionally qualified; high turnover; no development plan; people in roles above their capability with no plan to close the gap. The professional bodies — ICAEW, ACCA and CIMA — set out what each qualification covers.

7. Technology and Systems

The finance function’s technology — accounting software, reporting tools, payroll and purchase ledger platforms — should be fit for the current scale and complexity of the business. Assess: is the accounting software appropriate for current transaction volumes, entity structure and reporting requirements? Is the team using spreadsheets to compensate for gaps in the system? Has the technology been reviewed within the last three years?

Strong performance: software appropriate for current scale (Xero, Sage, NetSuite or SAP depending on size); minimal manual data entry; a consolidation tool where there are multiple entities; payroll integrated or well reconciled. Weak performance: an outgrown system requiring significant manual workarounds; consolidation in spreadsheets; qualified staff spending time on data entry that should be automated. Where the answer is a system change, see our page on the Financial Controller for ERP and finance system change.

8. Strategic Financial Support

At businesses of £15m and above, the finance function should be providing strategic support beyond monthly management accounts — input to the annual strategic planning process, long-range financial modelling, capital allocation analysis and scenario planning. Assess: is finance involved in strategic planning, or does it receive the completed plan and produce a financial translation? Does the FD or FC present the strategic financial position to the board?

Strong performance: the FD leads the finance input to the strategic plan; a long-range model is maintained and used in board discussions; finance challenges strategic decisions the model does not support. Weak performance: finance receives the plan and produces a budget from it; no long-range model; the FD absent from or silent in strategic discussions.

Scoring Your Finance Function

Count your Strong, Needs Development and Weak scores. A finance function with five or more Weak ratings has structural issues that represent material risk and need urgent attention — through recruitment to address capability gaps, investment in technology, or management intervention on process failures. A function with three or more Needs Development ratings is performing adequately but below what the business could achieve with modest, targeted investment. A function with six or more Strong ratings is performing well, and the priority should be keeping the current team rewarded and developed.

Score with evidence rather than impressions: the last six months’ close dates, the last two audit management letters, a sample of the cash forecast against actuals and the current organisation chart. Where the CEO and the FC score a dimension differently, that gap is itself a finding worth discussing.

Cross-Checking Cost: Is the Function Resourced for the Stage?

Cost tells you whether the function is resourced for the business it serves. Under-resourcing is more common than over-spending: a business that grows from £8m to £20m revenue with the same team usually shows it first in the close and the cash forecast. As a guide, London totals from our finance team costs guide are:

A permanent London Financial Controller typically costs £85,000–£105,000 a year all-in once employer National Insurance at 15%, pension and benefits are added. Where the need is one or two days a week, a fractional Financial Controller typically costs £29,000–£39,000 a year for one day a week in London and £52,000–£68,000 for two. A function scoring Weak on several dimensions while costing well below these ranges is usually under-resourced rather than underperforming.

What to Do With the Assessment

An honest assessment against these eight dimensions will typically reveal one of three situations. The first is a capability gap — the function is failing in one or more dimensions primarily because the most senior finance professional does not have the skills or experience the business now needs. The solution is almost always a recruitment decision: replacing the current senior finance professional or adding a more senior person above them. See the Financial Controller and Finance Director recruitment pages; FD and CFO searches typically run with our sister firm FD Capital.

The second is a structural gap — the right people in the wrong structure, so the capable FC is spending time on tasks a junior team member should handle, or strategic planning is not delivered because the FC’s time is consumed by the close and the audit. The solution is a structural change: adding a Management Accountant to free the FC, or adding an FD or fractional FD to take the strategic leadership dimension. See the Finance Team Structure guide for typical structures at each revenue stage.

The third is a resource gap — the right structure and people operating without the technology, time or organisational support to perform as their capability allows. The solution is an operational investment rather than a people change: upgrading the accounting system, investing in reporting tools, reducing non-finance demands on the team, or budgeting for external advisory support.

In practice the most valuable question is not “is our finance team good?” — the answer is usually yes — but “what financial management outputs do we need that the current team is not producing, and what would it take to produce them?” Many businesses have a finance function that was right two or three years ago and has not kept pace with growth, so the answer is often structural: the team lacks time and support rather than capability.

The External Auditor’s Perspective

If your business is audited, the management letter and the conduct of the audit provide valuable evidence. Auditors who spend more fieldwork time than expected, raise more queries than in previous years or produce a management letter with material points are signalling weakness — often more clearly than the internal assessment, because the letter reflects a systematic professional review of the controls and the accounting.

Review the last three years of management letters and classify each point: new and significant (deterioration); repeated from the previous year (prior points not addressed); or resolved and not recurring (improvement). A function that generates the same points year after year has an internal view of its own performance that is more generous than the auditor’s.

If your business is not audited, the external accountant’s feedback on the year-end accounts is the closest equivalent. Under the current small company thresholds, a company is generally small, and can usually claim audit exemption, if it meets at least two of: turnover of not more than £15m, a balance sheet total of not more than £7.5m and no more than 50 employees. An external accountant who consistently needs significant adjustments, or whose preparation time keeps rising, is giving an implicit assessment the CEO should take seriously.

Benchmarking Against Comparable Businesses

One of the most useful frames for assessment is comparison with businesses at a similar revenue stage, in a similar sector and with similar ownership. What does their finance team look like — how many people, at what seniority, with what qualifications? What does their management pack look like, how soon after month-end does it arrive, and how long does their audit take?

Specialist finance recruiters see this comparison routinely, because every brief we take describes a team, a close timetable and a set of reporting expectations. When a CEO asks whether their finance function is structurally right for its current scale, a consultant can give a view based on the comparable businesses we work with, not a generic survey figure. That conversation is available without obligation.

It typically takes twenty to thirty minutes, covering team structure, close timetable, audit arrangement, FP&A capability and technology, and ends with a view on where the structure is under-resourced, over-structured or about right.

Acting on the Assessment: A Prioritised Approach

The temptation is to address every weakness at once. This is rarely right: it overloads the team and makes improvement hard to attribute. Addressing the most material weaknesses first, stabilising the function and then moving to secondary priorities is consistently more effective.

The priority order for most businesses is: financial controls first (a material control gap is the highest-risk weakness); close quality and cash forecasting second (the outputs the management team depends on most); team capability third (the most sustainable improvement comes from the right people in the right roles); and commercial analysis and strategic support last (high-value, but dependent on a stable operational foundation). This mirrors the sequence in our finance transformation roadmap, where stabilising the close and controls comes before systems, reporting and automation.

The most common mistake is to start with the most visible weakness — often late management accounts — without addressing its cause. Late accounts are almost never fixed by asking the FC to work harder. They are fixed by adding a Management Accountant to support the close, upgrading the accounting system to reduce manual processing, or clearing the transactional backlogs that delay the close. Where the close needs fixing quickly, an interim Financial Controller for reporting problems can stabilise it while the permanent structure is decided. Diagnose the root cause before implementing the solution.

Evaluating Your Finance Function: FAQs

How often should we evaluate the finance function?

Annually as a minimum, and whenever the business changes materially: a funding round, an acquisition, a new system, rapid growth or the departure of the senior finance person.

What if the assessment points to a hire?

Brief us with the gaps the scorecard identified. We respond the same working day; permanent shortlists typically follow within one to two weeks and interim or fractional shortlists within days. Fees are agreed in writing before a search starts.