Finance director responsibilities: 13 red flags every new finance director should investigate

Finance director responsibilities today involve so much more than producing financial reports and preparing forecasts. Nowadays, the role means finance leaders have to be aware of the business in general, identify risks, and provide the commercial insight needed to make the best decisions.

For a new finance director, one of the first priorities is understanding the business’s underlying financial position and identifying warning signs before they develop into more significant issues. The first few weeks also set the tone for future relationships. Instead of rushing into change, effective finance directors take time to listen, evaluate how the business operates, and build credibility before deciding which areas require attention.

In this guide, we explore key finance director responsibilities, what makes a successful finance leader, and 13 financial red flags every new finance director should investigate in their first month.

What are a finance director’s responsibilities?

A finance director is responsible for overseeing your business’s financial health, ensuring effective financial management, and providing strategic insight to support business growth.

While financial reporting and compliance remain important parts of the role, modern finance director responsibilities are more wide-ranging and now include the following:

• Overseeing financial performance and reporting: A modern finance director makes sure financial information is accurate and gives relevant insight into business performance. Many businesses also work with external advisers for specialist accounts and business advice, to allow finance leaders to improve reporting processes, meet compliance requirements, and make better strategic choices.
• Managing financial planning and forecasting: Finance director responsibilities include creating budgets, forecasts, and financial models that help the business prepare for future opportunities and challenges.
• Protecting cash flow and financial health: A finance director is expected to monitor liquidity, working capital, and other factors that influence the organisation’s financial resilience.
• Strengthening internal controls and governance: This involves establishing solid processes that improve accountability, reduce errors, and minimise exposure to financial risk.
• Supporting business decisions: A finance director should use financial insight to support leadership teams in evaluating opportunities, assessing potential risks, and making strategic choices about investment, growth, and operational priorities.
• Managing financial risk: Identifying potential threats, assessing their impact, and implementing best practice measures are all part of the finance director’s responsibilities when it comes to protecting the business.
• Advising the board and senior leadership: A good finance director acts as a trusted adviser by translating financial information into practical business recommendations.
• Leading the finance team: A finance director is also expected to develop people, improve processes, and make sure the finance function adheres to the overall goals of the business.

13 financial red flags every finance director should investigate

Speaking with stakeholders is often one of the most best ways to uncover issues that financial reports alone may not reveal. If a finance director assesses these perspectives, it helps them build a better picture of where finance is adding value, where risks may be hidden, and which improvements should be prioritised.

Questions such as “where do you think the biggest risks or blind spots are?”, and “what’s the most manual or painful process we run?” can reveal issues that otherwise wouldn’t be found in financial reports.

Let’s examine some of the top red flags every new finance director should be looking at:

1. Weak cash controls: an early indicator of financial risk

Cash flow is one of the most important indicators of business health. However, weak cash controls can leave the business exposed to avoidable risks, from unexpected cash shortages to fraud and poor financial choices. For a new finance director, one of the first priorities should be to build an idea of how cash is managed.

Weak cash controls could indicate:

• unclear ownership of cash management processes
• insufficient approval procedures
• poor visibility of future cash requirements
• increased exposure to errors or fraudulent activity

Questions a new finance director should ask:

• Who is responsible for monitoring cash flow?
• How frequently are cash forecasts updated?
• Are payment approvals appropriately controlled?
• Are there clear segregation-of-duties processes?

Strengthening cash controls improves financial visibility and gives leadership teams a stronger basis for the decisions they make. But, before introducing change, a new finance director should understand how existing processes work and why they have evolved into their current form.

Where additional funding is required to support growth or improve cash resilience, finance directors may also need to consider different funding options, including debt and equity finance raising.

2. Overdue audits: identify governance weaknesses

Overdue audits can be a warning sign that financial processes, governance arrangements, or internal resources may need further investigation. While delays can sometimes be caused by practical challenges, a pattern of missed deadlines could indicate wider issues within the finance team.

A new finance director should find out:

• why audits are overdue
• whether previous recommendations have been addressed
• if there are recurring issues being identified
• whether the organisation has sufficient processes in place to prepare for audits

Potential consequences include:

• reduced confidence from stakeholders
• delays in financial reporting
• increased compliance risks
• unresolved control weaknesses

One of the first conversations a new finance director should have is with the organisation’s external accountant or auditor. They can often provide an objective perspective on recurring issues, control weaknesses, and areas that require early attention.

Independent audit and assurance support can also help highlight control weaknesses, enhance governance, and give stakeholders peace of mind when it comes to financial reporting.

3. HMRC enquiries: understand potential compliance risks

Contact from HMRC does not automatically mean something is wrong, but repeated enquiries or unresolved issues should be investigated as part of a new finance director’s review of financial risk.

HMRC enquiries may mean finance directors have to review tax processes, record keeping, and compliance procedures to ensure potential issues are identified and addressed.

Questions a new finance director should ask:

• What triggered the enquiry?
• Are there any outstanding issues or disputes?
• Have similar concerns been raised previously?
• Are tax processes documented and regularly reviewed?

If a new finance director takes a proactive approach to compliance, this can help reduce disruption, avoid unexpected liabilities, and establish confidence that the business’s financial affairs are being managed appropriately.

Maintaining accurate records is an essential part of meeting tax obligations and responding effectively to HMRC enquiries.

4. Unreconciled balance sheet items: a warning sign in financial reporting

Accurate financial reporting relies on the underlying data being complete and reliable. Unreconciled balance sheet items can indicate that financial records are not being reviewed thoroughly or that issues are being carried forward without resolution. For a finance director, these issues matter because they can affect the accuracy of management information and decisions that are made.

Items may include:

• old outstanding balances
• unexplained transactions
• incorrect allocations
• unreconciled bank accounts or control accounts

Questions a new finance director should ask:

• How often are balance sheet reconciliations completed?
• Who reviews outstanding items?
• How long have unresolved balances remained open?
• Are there recurring reconciliation issues?

Improving reconciliation processes boosts financial controls and helps ensure leaders are working from accurate information.

5. Key person dependency in finance: reduce operational risk

A finance function that relies heavily on one individual can create real operational risk. While experienced employees are valuable assets, excessive dependency on one person’s knowledge, systems access or processes can cause problems if they leave unexpectedly or are unavailable. Reducing dependency risk improves resilience and ensures the finance function can continue operating effectively.

Signs of key person dependency include:

• undocumented processes
• limited cross-training
• one person controlling critical financial tasks
• knowledge gaps across the wider team

Questions a new finance director should ask:

• Who understands the organisation’s key finance processes?
• Are responsibilities shared across the team?
• Is important knowledge documented?
• Are there appropriate access controls?

6. High staff turnover: uncover deeper finance function issues

High employee turnover within finance may indicate problems with workload, leadership, processes, or culture.

A new finance director should avoid assuming that departures are simply a recruitment issue. Staff turnover can provide real insight into how the finance function operates day-to-day.

Potential causes may include:

• inefficient manual processes
• unrealistic workloads
• limited development opportunities
• unclear roles and responsibilities
• poor communication

Questions a new finance director should ask:

• Why have people left the team?
• What challenges do current employees experience?
• Are there skills gaps within finance?
• Does the team have the resources it needs?

If a finance director understands these issues, it helps them build a stronger finance function and assess whether the team has the capacity, skills, and processes needed for future growth of the business.

7. Repeated forecast misses: improve financial planning accuracy

Forecasting is one of the most important tools a finance director uses to shape business strategy. But, repeated forecast misses may mean weaknesses in financial planning processes or a lack of alignment between finance and the rest of the business.

Forecast inaccuracies could be caused by:

• unrealistic assumptions
• poor-quality data
• limited input from operational teams
• changing market conditions not being reflected quickly enough

Understanding the cause of forecasting challenges is essential. Finance directors should assess whether issues stem from unrealistic assumptions, poor data quality, or limited collaboration between finance and operational teams.

Questions a new finance director should ask:

• How accurate have previous forecasts been?
• Where have the biggest variances occurred?
• Are assumptions challenged before forecasts are approved?
• Are teams aware of their role in the forecasting process?

If a finance director can improve forecasting accuracy, this will help the business respond to emerging challenges, allocate resources effectively, and make better strategic choices.

8. Weak approval processes: strengthen financial controls

Effective financial controls allow businesses to manage risk, improve reporting accuracy, and help ensure processes are operating effectively. The Financial Reporting Council’s guidance emphasises the importance of robust risk management and internal control frameworks.

Weak controls may allow inappropriate spending, increase the likelihood of errors, and make it difficult to establish accountability for important decisions.

Priority areas to review include:

• spending approval limits
• procurement processes
• authorisation procedures
• access rights across financial systems

Warning signs include:

• unclear approval responsibilities
• excessive reliance on informal processes
• lack of documentation
• inconsistent application of controls

A new finance director should aim to strengthen approval processes to create better oversight and support good financial governance.

9. No risk register: create visibility of financial risks

A risk register is a structured way to identify, assess, and monitor potential threats to the organisation. Without one, businesses may struggle to understand their biggest exposures or take proactive action to address them.

Finance leaders should assess whether the business has visibility of:

• financial risks
• operational risks
• compliance risks
• strategic risks

Questions a new finance director should ask:

• What are the organisation’s biggest risks?
• Who owns responsibility for managing each risk?
• How frequently are risks reviewed?
• Are financial risks linked to business objectives?

A finance director should create a robust risk register to help ensure potential problems are detected before they become real issues.

10. Poor alignment on strategy: ensure finance supports business goals

Finance directors play an essential role in connecting financial performance with strategic objectives. Poor alignment between finance and the rest of the business can limit growth and cause unnecessary risks.

Warning signs include:

• finance being involved too late in decisions
• unclear business priorities
• limited awareness of strategic goals
• financial choices being made without robust analysis

Questions a new finance director should ask:

• What are the business’s key priorities over the next 12 months?
• How does finance support these objectives?
• Are investment decisions supported by clear financial insight?

A high-performing finance function should not operate separately from the business. It should help shape strategy and provide the business with the financial insight needed to make better choices.

Finance directors may also play a key role in supporting strategic initiatives such as acquisitions, or restructuring; often with support from specialist corporate finance advisers.

11. Poor quality management reporting: improve decision-making insight

Management reporting should give leaders the information they need to understand performance and take any appropriate action. The most valuable management information is not necessarily the most detailed, but information that helps leaders pinpoint performance drivers, challenge assumptions, and take appropriate action.

Poor-quality reporting may include:

• reports that focus only on historical results
• unclear explanations of variances
• excessive manual preparation
• information that arrives too late to be useful

A finance director should review whether management reporting provides the insight leaders need to run the business effectively.

Key areas to consider include:

• whether reports highlight the key drivers behind performance, not just historical results
• whether information is provided early enough to drive better decisions
• whether reporting processes are efficient and scalable as the business evolves

12. Resistance to change: overcome barriers to improvement

Finance functions need to change as the business grows, and resistance to change can prevent improvements in processes, technology, and ways of working. That said, any resistance may also highlight underlying concerns that need to be addressed.

A new finance director should explore:

• why people are reluctant to change
• if teams are aware of the benefits of possible changes
• whether employees have the skills and support needed

Effective change means communication, involvement, and a clear understanding of the problem being solved.

13. Lack of governance: protecting long-term business performance

Strong governance provides the foundation for effective financial management. The UK Corporate Governance Code highlights the importance of effective board oversight, risk management, and internal controls; principles that are relevant to businesses looking for strong governance models.

Governance issues may include:

• unclear responsibilities
• limited board oversight
• inconsistent policies
• insufficient monitoring of key risks

Questions a new finance director should ask:

• Are financial responsibilities clearly defined?
• Are policies documented and reviewed?
• Does the board receive appropriate financial information?
• Are risks actively monitored?

Improving governance strengthens accountability, gives a business a sound basis for decision-making, and develops a stronger foundation for sustainable growth.

Finance director responsibilities: what to prioritise in your first month

To understand finance director responsibilities, you must recognise that the role involves far more than producing reports or explaining historical performance. Modern finance leaders are responsible for protecting the business’s long-term financial health, spotting potential risks, and helping leadership teams take better strategic choices.

If a finance director can uncover financial red flags early, it allows them to strengthen controls, improve governance, and address risks before they begin to affect business performance.

Remember that lasting improvements rarely come from acting too quickly. Accomplished finance directors spend their first month listening to stakeholders, getting an idea of how the organisation operates, and building credibility before introducing any major change. This approach helps distinguish isolated issues from deeper organisational challenges and ensures improvement efforts are focused where they will deliver the greatest value.

The strongest finance leaders do not make changes based solely on what the numbers tell them but combine financial analysis with insight from across the business. In this way, they understand the people, processes, and systems influencing performance.

If you’re a new finance director or an established finance leader looking to build your finance function, our advisers can help you uncover risks, improve financial controls, and give stronger commercial insight.