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....