You cannot be serious……You want ME to write about accountancy and finance!
If am honest about it, I am quite simply rubbish at maths and numbers in general. I always have been and no doubt always will be. I was frequently in the bottom set for mathematics at school, and I am ashamed to say found myself unable to solve my elder daughters “homework of sums” from the moment she went to secondary school.
So given the above track record, I am probably one of the least well qualified individuals to blog about accounting and finance that you can possibly imagine. But nevertheless here goes….
Accountancy has always been a well-paid profession and grudgingly I have to admit deservedly so. After all, are not all businesses ultimately about the bottom line? Without mastery of cash flow and the balance sheet, any business is just a bank transaction or two away from oblivion. Many brilliant businessmen (and women) have ended up bankrupt, because despite their command of other disciplines such as invention, salesmanship or marketing they lacked the skills or access to a good “bean counter” (accountant). Good accountancy practice is in short the foundation stone on which any successful business is built.
The fact is that when accountancy standards are less than of the highest order, someone, somewhere is going to get hurt. Commercial history is littered with the financial wreckage of companies whose accountancy practices were less than perfect. In recent years household names have been forced to rewrite their books to reflect a more accurate state of their financial affairs. Such scandals have engulfed major multinationals such as Enron and more recently Olympus in the decade appropriately named “noughties”.
On a much smaller scale when my daughter took over a dance school as a going concern almost a year and a half ago, I was impressed at the level of time she invested not just in the creative side of the business (her core strength) but in the number crunching that came with it. She took two key decisions. First of all, she found herself an excellent accountant who guided her through the tricky process of acquiring the business, and following a successful outcome she has since appointed him as her regular accountant. Now I should point out at this stage that she has never met “Philip”, as his practice is located over 250 miles away. This is a professional relationship that has been developed online, and by phone. I am pleased to report that it works very well indeed.
Secondly she personally placed a great deal of time and effort into improving the processes that control the numbers within the business. This has meant that the information she has available is of a far higher quality, thereby allowing her accountant to provide an even better service. This has created a virtuous circle of information and advice.
On a much wider scale it is worth mentioning the role that IT has had to play in the financials of any business. Prior to the 1990s it was common for businesses to use software packages to assist in the running of central financial processes. By this I mean sales ledger, purchase ledger, and payroll. However the patchy implementation of these packages often meant they were operated in isolation, thereby nullifying much of their effectiveness and potential benefits. The late 1980s and 1990s saw the development of more sophisticated Enterprise Resource Planning (ERP) packages. These packages were far more integrated and offered the promise of large scale savings and improved competitiveness. This was a halcyon era for the application software industry. Companies such as SAP, Oracle, PeopleSoft, Sage, and a host of other financial software players were able to demonstrate to their clients that considerable savings could be made by linking ERP processes with other key areas of a business; for example Customer Relationship Planning (CRM) and Supply Chain Management (SCM).
Today the evolution of financial processes and the support provided by IT continues. Nowadays the focus is on the explosion of data available (so called big data) and the delivery of real-time analysis, thereby allowing businesses to increase flexibility and respond faster to marketplace changes.
It is a confusing world where it seems everything is changing and yet at the same time the fundamentals remain the same. On the one hand the technology available is faster, more efficient and delivers an ever more impressive capability. On the other hand the area of focus remains the same financial processes. The mantra of the company accountant is still what it always has been; “Control costs, maintain good cash flow”.
So it turns out that finance is not so scary after all. I know I will never be an accountant, but I do now acknowledge and understand a little better the vital role that they play in a business, be it large or small, and that for me at least is good enough.
