A number of surveys over the past few years have indicated that accountants remain many business’ most trusted advisors.
This is something that we as finance directors take pride in of course, although it does not make us complacent.However the reaction to the recent survey by the Institute of Chartered Accountants, which suggests that confidence among business professionals has moved into positive territory for the first time in two years, thus indicating that the UK economy may well be showing signs of recovery, seems to have taken this trust to new levels, with the stock market rising to new year on year highs last week.
It seems that politicians, bankers and economists can chunter on as much as they like about future economic prospects, but it is humble beancounters rather than these masters of the universe that are most effective in moving markets.
So does this mean that the recession is over?
Well to misappropriate a well worn phrase, this may not be the beginning of end or even the end of beginning (there are still some nasty macro issues out there, such as the banks willingness and ability to lend, the need to rein in government spending and increase taxes to reduce the ballooning public sector deficit and the lagging indicator that is unemployment), but if there is a chance that some confidence is returning to the economy, it might just provide the encouragement needed by those business owners and managers who have been frustrated by their relative inaction since the start of the year, and who want to start moving things forward again in the last third of the year.
Now that would be an achievement for us beancounters to be proud of.
Monday, 31 August 2009
Tuesday, 18 August 2009
Credit where credit’s due...
Abbreviated accounts filed ten months after the year end.
"At last! What a horrible year it was, glad that’s out of the way. Well, that is all my accounting done for another year apart from a few other bits and pieces to keep the taxman happy. Still the accountant and bookkeeper take care of all that. Job done, next!”
“What’s that? Our main supplier has cut our credit lines? Why? Because our latest set of accounts as filed at Companies House aren’t very good and are out of date? But that was ages ago! What about those new orders we’ve just won in the teeth of the recession? A couple of them gave us some cash up front and we’ve just banked some large receipts on a profitable old job so we’re quite flush at the moment. However we really need those additional supplies. You want a set of management accounts? What are they when they're at home?”
Genuine quotes from a small business owner? Maybe not yet, but they soon could be. Research by Graydon, the credit management specialists indicates that the lack of publicly available financial information could lead to many SMEs being refused credit by key suppliers. Therefore such businesses may need to have up to date financial information available to share with credit rating agencies. Indeed Graydon have teamed up with Validis to develop their own enhanced credit information service based around validated up to date management accounts.
The increasing number of financial reporting obligations that are likely to be imposed on SMEs don’t end there. Debate is raging within financial reporting circles as to when and how SMEs can be brought into the International Financial Reporting Standards (IFRS) net. Indeed, if the Accounting Standards Board has its way, it could be that our much loved UK GAAP will soon be a feature of history textbooks rather than accounting textbooks, as companies will ultimately be expected to adopt either full IFRS, IFRS for SMEs or the FRSSE for smaller entities.
Funnily enough, during a recent clearout, I came across an old exam paper that posed the question as to whether the future should be “accounting for everyman” i.e. simple and understandable or a highly specialised profession. It seems to have gone in the direction at the latter, with accounts being increasingly detailed and complex and requiring an in depth study by experts in order to fully understand what they are actually saying. This was particularly brought home to me when analysing the accounts of a couple of quoted US companies for a client recently (although ironically the disclosure requirements for unquoted companies in the US would appear to be minimal).
Perhaps another anguished cry can be added to the list of quotes above. “International Accounting Standards? But we don’t do any export business! Help!”
"At last! What a horrible year it was, glad that’s out of the way. Well, that is all my accounting done for another year apart from a few other bits and pieces to keep the taxman happy. Still the accountant and bookkeeper take care of all that. Job done, next!”
“What’s that? Our main supplier has cut our credit lines? Why? Because our latest set of accounts as filed at Companies House aren’t very good and are out of date? But that was ages ago! What about those new orders we’ve just won in the teeth of the recession? A couple of them gave us some cash up front and we’ve just banked some large receipts on a profitable old job so we’re quite flush at the moment. However we really need those additional supplies. You want a set of management accounts? What are they when they're at home?”
Genuine quotes from a small business owner? Maybe not yet, but they soon could be. Research by Graydon, the credit management specialists indicates that the lack of publicly available financial information could lead to many SMEs being refused credit by key suppliers. Therefore such businesses may need to have up to date financial information available to share with credit rating agencies. Indeed Graydon have teamed up with Validis to develop their own enhanced credit information service based around validated up to date management accounts.
The increasing number of financial reporting obligations that are likely to be imposed on SMEs don’t end there. Debate is raging within financial reporting circles as to when and how SMEs can be brought into the International Financial Reporting Standards (IFRS) net. Indeed, if the Accounting Standards Board has its way, it could be that our much loved UK GAAP will soon be a feature of history textbooks rather than accounting textbooks, as companies will ultimately be expected to adopt either full IFRS, IFRS for SMEs or the FRSSE for smaller entities.
Funnily enough, during a recent clearout, I came across an old exam paper that posed the question as to whether the future should be “accounting for everyman” i.e. simple and understandable or a highly specialised profession. It seems to have gone in the direction at the latter, with accounts being increasingly detailed and complex and requiring an in depth study by experts in order to fully understand what they are actually saying. This was particularly brought home to me when analysing the accounts of a couple of quoted US companies for a client recently (although ironically the disclosure requirements for unquoted companies in the US would appear to be minimal).
Perhaps another anguished cry can be added to the list of quotes above. “International Accounting Standards? But we don’t do any export business! Help!”
Wednesday, 29 July 2009
As if by magic...
Hot on the heels of my last post, here is a recent article from the Financial Times by serial entrepreneur, Luke Johnson, which should serve as a checklist for anybody using a finance director (which should be everybody!).
Numbers guys you can count on gives it to you straight. As Luke says "a proper company cannot function without a decent finance director at the helm, supervising, informing and warning." Ignore him at your peril!
Numbers guys you can count on gives it to you straight. As Luke says "a proper company cannot function without a decent finance director at the helm, supervising, informing and warning." Ignore him at your peril!
Saturday, 18 July 2009
FDs taking the centre stage – is yours up to it?
Yet another study has revealed that CFOs and FDs are now coming into their own. All right, it comes from the Chartered Association of Certified Accountants so maybe there is a hint of vested self interest, but even so, there is enough anecdotal evidence out there to suggest that the principles of sound financial management and good business practise are not mutually exclusive in the way that they seemed to be during the recent bubble years. At last we downtrodden finance folk are being given the chance to do what we do best, and save our businesses in the process.
But wait a minute what is this other sound? Desk being cleared and doors slamming shut behind you? Whisper it but some CFOs and FDs are now being “found out”, and that the qualities that made them adequate during the boom years are not suitable for the tough times that are now upon us. At a recent conference I attended, the Managing Director of a respected local business told of how, when faced with a downturn in business last year, he quickly realised that his FD was not up the task and as a result very quickly got himself a new one.
Studies show that 80% of the value of an FD comes from 20% of their time. Much of an FD’s time in many organisations is often spent on managing other functions, such as IT and HR which may not fit their skillsets, or indulging in internal politics. In situations like this, the question a value for money becomes more and more pertinent. If you are paying somebody a package in excess of £100k you would expect them to be performing at this time and showing their true worth. If they are not, it may be time to consider other options.
But wait a minute what is this other sound? Desk being cleared and doors slamming shut behind you? Whisper it but some CFOs and FDs are now being “found out”, and that the qualities that made them adequate during the boom years are not suitable for the tough times that are now upon us. At a recent conference I attended, the Managing Director of a respected local business told of how, when faced with a downturn in business last year, he quickly realised that his FD was not up the task and as a result very quickly got himself a new one.
Studies show that 80% of the value of an FD comes from 20% of their time. Much of an FD’s time in many organisations is often spent on managing other functions, such as IT and HR which may not fit their skillsets, or indulging in internal politics. In situations like this, the question a value for money becomes more and more pertinent. If you are paying somebody a package in excess of £100k you would expect them to be performing at this time and showing their true worth. If they are not, it may be time to consider other options.
Wednesday, 15 July 2009
When the going gets tough, it is time to show real leadership
Leaders. Overused, abused, misunderstood?
Possibly, although I think these words are more apt when they apply to the term leadership. Never in the field of business education has there been a more analysed and yet arguably more poorly taught discipline. Many would-be business leaders on leadership courses end up being put through all sorts of self analysis tools, pumped full of the most up to date leadership theories and encouraged to seek their examples from the sporting and military world. And yet in spite of this, leadership in the UK remains of varying quality, and most business failures tend to be the result of poor leadership.
I recently attended a Surrey Chamber of Commerce breakfast which had leadership as its theme, and featured Simon Hazeldine of Mentor Group as its main speaker. Simon’s theme was that leadership was about results and that basically without great results, you cannot have great leadership. He noted that the quality of a leader was reflected in the quality of the team that they led, and that an employee’s behaviour will often be determined by that of their leader. He saw employee engagement as the key to avoiding the not insignificant costs of poor performance, and that leaders needed to use logic and emotion to win the hearts and minds of their people. All very good stuff, and well worth the early morning trip to Epsom Downs racecourse.
As highlighted by Simon above, the best leaders invariably have the best teams, and it is often how these teams develop their own leadership qualities that will shape their success. Regardless of position, job content or (dare I say it) salary level, nearly everybody is expected to show leadership in some way, and it is organisations that recognise this, and train their people accordingly, that are more likely to be successful in the long run.
But leadership training should not just be the preserve of big corporates. Dealing with SMEs as I do, I am often struck by how the assumption that entrepreneurs are natural leaders is accepted without question. Sure, some entrepreneurs do show the right aptitude for leadership, but many begin to flounder the moment their businesses start to gain any sort of momentum, or worse, they believe that because they are the boss, and that it is their company, they will automatically have leadership status conferred upon them without the need to do anything to justify it. Such businesses invariably underachieve, which is a shame, as they often have the potential to become real contributors to the future growth of our economy.
Leadership has probably been quite easy over the past few years as it has been relatively simple to be successful. However, given that success is much harder to come by in the current climate, now more than ever good quality leadership will be the key, not only to surviving, but to being well prepared for the upturn when it arrives.
Possibly, although I think these words are more apt when they apply to the term leadership. Never in the field of business education has there been a more analysed and yet arguably more poorly taught discipline. Many would-be business leaders on leadership courses end up being put through all sorts of self analysis tools, pumped full of the most up to date leadership theories and encouraged to seek their examples from the sporting and military world. And yet in spite of this, leadership in the UK remains of varying quality, and most business failures tend to be the result of poor leadership.
I recently attended a Surrey Chamber of Commerce breakfast which had leadership as its theme, and featured Simon Hazeldine of Mentor Group as its main speaker. Simon’s theme was that leadership was about results and that basically without great results, you cannot have great leadership. He noted that the quality of a leader was reflected in the quality of the team that they led, and that an employee’s behaviour will often be determined by that of their leader. He saw employee engagement as the key to avoiding the not insignificant costs of poor performance, and that leaders needed to use logic and emotion to win the hearts and minds of their people. All very good stuff, and well worth the early morning trip to Epsom Downs racecourse.
As highlighted by Simon above, the best leaders invariably have the best teams, and it is often how these teams develop their own leadership qualities that will shape their success. Regardless of position, job content or (dare I say it) salary level, nearly everybody is expected to show leadership in some way, and it is organisations that recognise this, and train their people accordingly, that are more likely to be successful in the long run.
But leadership training should not just be the preserve of big corporates. Dealing with SMEs as I do, I am often struck by how the assumption that entrepreneurs are natural leaders is accepted without question. Sure, some entrepreneurs do show the right aptitude for leadership, but many begin to flounder the moment their businesses start to gain any sort of momentum, or worse, they believe that because they are the boss, and that it is their company, they will automatically have leadership status conferred upon them without the need to do anything to justify it. Such businesses invariably underachieve, which is a shame, as they often have the potential to become real contributors to the future growth of our economy.
Leadership has probably been quite easy over the past few years as it has been relatively simple to be successful. However, given that success is much harder to come by in the current climate, now more than ever good quality leadership will be the key, not only to surviving, but to being well prepared for the upturn when it arrives.
Thursday, 9 July 2009
The Only Way Is Up?
Testing times, unprecedented times, uncertain times.
That was the general message of the 5th Hart Brown Annual Economic Forum entitled “Navigating The Recession” which I recently attended at the University of Surrey in Guildford.Now that is clearly not an unusual message in today’s economic climate, but maybe what was less usual was the quality of the speakers that Hart Brown, the Surrey based firm of solicitors had brought together to provide that message. Mark Curtis, managing director of key Surrey manufacturers Vision Engineering, Giles Keating, Global Head of Research at Credit Suisse, and everybody’s favourite politician Vince Cable offered a range of insights that left the 300 plus attendees in no doubt that they would need to be bold and brave if they were to take advantage of the post recession world.
Looking at some of the previous blog entries, there is a danger that we are becoming cheerleaders for the Lib Dem Shadow Chancellor, but when he continues to offer the clear, concise and reasoned arguments that he did at the forum, then it is hard not to keep cheering and waving. Pointing out that the current problems stem from a collapse in asset prices, a reduction in credit and a global recession he took the view that rather than suffering from a dose of flu, the economy had suffered a very big heart attack, which would necessitate a radical change in lifestyle once recovery was underway.He saw three obstacles to recovery: the need for high interest rates to combat potential inflationary pressures, the size of the deficit being run up by the current government and the fact that the banks were still not functioning properly. Nevertheless, positive signs included the fact that governments globally were doing all that they could to combat recession, that many UK companies were still doing well, including many world class ones, and that there was a high level of flexibility in the labour market and a willingness to accept short time working and pay cuts to preserve cash and jobs.
Giles Keating had flown over from Zürich especially for this forum and began by saying categorically that the recession would be over this year. He focused on four questions during his presentation, namely how robust the recovery was, whether the emerging markets would replace the US consumer as the driver of growth, will inflation surge and are we seeing the start of a new equity bull market? He was armed with an impressive array of charts and statistics which he used to indicate that there was some substance to the recovery, that he believed that the world that emerged would be vastly different and that the emerging markets would be the dominant forces in the new economy, that inflation could be contained and that there was every chance of a return to a bull market in equities.
Having heard from a politician and an economist, it was nice to get a view from a real business. Vision Engineering is a manufacturer of optical instrumentation, much of which is exported, and its managing director, Mark Curtis, professed to be baffled by macro economics, preferring to focus on achievement based on an honest day’s work. He outlined some of the actions, both precautionary and emergency, that his company had found necessary to take to cope with the significant fall in orders that his company had faced. He emphasised the need for developing strategies based on clearly defined problems in each of his key markets, and then using leadership to instil the confidence required to move the business forward. His conclusions centred upon what should now be considered as realistic growth and the importance of not being beholden to the banks or uninformed shareholders, along with some pithy comments about the lack of joined up thinking at government level.
All in all a very interesting and enjoyable evening, and one which left plenty to think about as we drifted off into the night after our drinks and canapés.
That was the general message of the 5th Hart Brown Annual Economic Forum entitled “Navigating The Recession” which I recently attended at the University of Surrey in Guildford.Now that is clearly not an unusual message in today’s economic climate, but maybe what was less usual was the quality of the speakers that Hart Brown, the Surrey based firm of solicitors had brought together to provide that message. Mark Curtis, managing director of key Surrey manufacturers Vision Engineering, Giles Keating, Global Head of Research at Credit Suisse, and everybody’s favourite politician Vince Cable offered a range of insights that left the 300 plus attendees in no doubt that they would need to be bold and brave if they were to take advantage of the post recession world.
Looking at some of the previous blog entries, there is a danger that we are becoming cheerleaders for the Lib Dem Shadow Chancellor, but when he continues to offer the clear, concise and reasoned arguments that he did at the forum, then it is hard not to keep cheering and waving. Pointing out that the current problems stem from a collapse in asset prices, a reduction in credit and a global recession he took the view that rather than suffering from a dose of flu, the economy had suffered a very big heart attack, which would necessitate a radical change in lifestyle once recovery was underway.He saw three obstacles to recovery: the need for high interest rates to combat potential inflationary pressures, the size of the deficit being run up by the current government and the fact that the banks were still not functioning properly. Nevertheless, positive signs included the fact that governments globally were doing all that they could to combat recession, that many UK companies were still doing well, including many world class ones, and that there was a high level of flexibility in the labour market and a willingness to accept short time working and pay cuts to preserve cash and jobs.
Giles Keating had flown over from Zürich especially for this forum and began by saying categorically that the recession would be over this year. He focused on four questions during his presentation, namely how robust the recovery was, whether the emerging markets would replace the US consumer as the driver of growth, will inflation surge and are we seeing the start of a new equity bull market? He was armed with an impressive array of charts and statistics which he used to indicate that there was some substance to the recovery, that he believed that the world that emerged would be vastly different and that the emerging markets would be the dominant forces in the new economy, that inflation could be contained and that there was every chance of a return to a bull market in equities.
Having heard from a politician and an economist, it was nice to get a view from a real business. Vision Engineering is a manufacturer of optical instrumentation, much of which is exported, and its managing director, Mark Curtis, professed to be baffled by macro economics, preferring to focus on achievement based on an honest day’s work. He outlined some of the actions, both precautionary and emergency, that his company had found necessary to take to cope with the significant fall in orders that his company had faced. He emphasised the need for developing strategies based on clearly defined problems in each of his key markets, and then using leadership to instil the confidence required to move the business forward. His conclusions centred upon what should now be considered as realistic growth and the importance of not being beholden to the banks or uninformed shareholders, along with some pithy comments about the lack of joined up thinking at government level.
All in all a very interesting and enjoyable evening, and one which left plenty to think about as we drifted off into the night after our drinks and canapés.
Monday, 6 July 2009
Other People’s Money
I have just been reading yesterday’s Mail On Sunday about the extraordinary expenses claimsof former JJB Sports chief Chris Ronnie, which recall the worst excesses of disgraced US CEOs such as Bernie Ebbers of Worldcom.Most of the expenses mentioned in the report from top accountants Deloitte referred to planes and helicopters but coming hot on the heels of the lurid stories of expenses claims by MPs, BBC executives using public money to shower its highly paid talent with gifts and dinners and the current focus on the revival of the lavish salary and bonus culture that permeates the City, it is easy to take the view that our leaders, be they public sector or private sector are seized by an extraordinary level of greed the moment they get the keys to the executive bathroom.
And yet are those of us that make up the lower reaches of the scale untainted by all of this? Fiddling expenses is sadly not uncommon within the work environment, and even those of us that would never dream of being dishonest will invariably make the most of any opportunity to help ourselves if our employers are paying. The temptation to enjoy the benefits of other people’s money remains strong.
Even owner managers, who are the closest to business people who actually do spend their own money, are not immune from such temptations, particularly when you consider that much of their funding comes from third party creditors and funders, such as banks, and that many such owners have difficulty distinguishing between the company’s funds and their own.
Actually what we are seeing here is what can be termed as a warped sense of entitlement, often borne of resentment at inadequate pay and rations or some other perceived employer slight. The inner justification of “I deserve it. It is my money really” is what drives this desire to maximise the use of other people’s money. In the case of the MPs, it was their view that their pay was not commensurate with their status and therefore it was right to use their generously lax expenses system to supplement it. In the case of Chris Ronnie, it was “I am important and therefore it is right that the company spends this money on me” and in the case of the average employee it is often “they don’t care about me so I will take them for everything I can get”.
I am not sure if we will ever reach a stage where people treat business expenditure in the way they treat the money that they have to shake out of their own personal piggy banks, but maybe the key to reducing this sense of entitlement, apart from implementing strong financial controls (including in the case of senior executives a robust non executive presence) and creating awareness of the fact that excessive use of other people’s money is plain wrong, is to make them feel more valued in the first place.
And yet are those of us that make up the lower reaches of the scale untainted by all of this? Fiddling expenses is sadly not uncommon within the work environment, and even those of us that would never dream of being dishonest will invariably make the most of any opportunity to help ourselves if our employers are paying. The temptation to enjoy the benefits of other people’s money remains strong.
Even owner managers, who are the closest to business people who actually do spend their own money, are not immune from such temptations, particularly when you consider that much of their funding comes from third party creditors and funders, such as banks, and that many such owners have difficulty distinguishing between the company’s funds and their own.
Actually what we are seeing here is what can be termed as a warped sense of entitlement, often borne of resentment at inadequate pay and rations or some other perceived employer slight. The inner justification of “I deserve it. It is my money really” is what drives this desire to maximise the use of other people’s money. In the case of the MPs, it was their view that their pay was not commensurate with their status and therefore it was right to use their generously lax expenses system to supplement it. In the case of Chris Ronnie, it was “I am important and therefore it is right that the company spends this money on me” and in the case of the average employee it is often “they don’t care about me so I will take them for everything I can get”.
I am not sure if we will ever reach a stage where people treat business expenditure in the way they treat the money that they have to shake out of their own personal piggy banks, but maybe the key to reducing this sense of entitlement, apart from implementing strong financial controls (including in the case of senior executives a robust non executive presence) and creating awareness of the fact that excessive use of other people’s money is plain wrong, is to make them feel more valued in the first place.
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