Making sure it really does all add up…..

A tale of two entities. One a public company one a charity. What do they have in common? They both apparently have beancounters that can’t add up! Step forward SuperGroup, home to the Superdry brand beloved by such luminaries as Justin Bieber and David Beckham, and the National Youth Theatre which launched the careers of Dame Helen Mirren and Colin Firth among others.

Getting the numbers wrong is the ultimate accountant’s nightmare. Most of us obsessively check and cross check what we do as well as putting other checks and balances in place to identify possible risks before they turn into real problems. Whenever we read about accounting errors we scurry back to our ledgers to see if there is anything we might have missed.

Clearly this is something that the organisations involved in this case didn’t do. Super Group’s fourth profit warning of the year was apparently down to bad accounting rather than bad business (I have to admit I can’t remember what the reasons for the other three were), one of the problems being that a plus was entered rather than a minus. They’ll probably blame that one on the education system. Meanwhile the National Youth Theatre’s problems were down to an “income stream” being entered into the books twice.

It does not have to be this way. In a small or medium sized business or charity it should be possible to put sufficient early warning systems in place to pick up errors. Whether it is daily cash balances, time sheet data, delivery patterns, production schedules, order books, stock shortages or invoices received and sent, reviewing some or all these activities on a regular basis should give an indication of how the business is doing and any inconsistencies that might exist well before any accounts are produced.

In a larger business checks and balances are more a case of having the right systems and people in place. Dealing with remote operations and staff is a challenge, particularly if you want to avoid micro management from the centre. Nonetheless good lines of communication, regular KPI reviews and tight control and monitoring of cash, allied to a real understanding of how the numbers should work, should provide some protection against accounting errors.

A well run organisation should make it possible to know how well or badly it is doing financially long before any monthly management reports are produced. Good managers who understand their businesses ought to be aware of problems before their accountants tell them. Maybe the blame in the above cases should be more widely apportioned....