Thursday, November 29, 2012

Business Support

Over the last couple of years I have been involved in a number of companies, from diversified economic groups with hundreds of employees through quoted start-ups to owner-operated small businesses. The accounting function in these companies can be classified in one of three ways:

  • business support function, providing timely, relevant information to managers to help them run the business;
  • irrelevant back-office legal necessity with no management reporting;
  • obstacle to business development, distracting management from strategic matters due to mis-handling and misinterpretation of information.
Unfortunately, none of the companies could boast systems that produced business support information, at least on a timely basis. Most companies fall into the second category. As for the third category, I am quite embarrassed as an accountant that accounting issues can be so complex and devoid of business relevance that this business support function can end up distracting management from strategic issues.

More worrying still, none of the companies had any cash-flow information built into their financial reporting. Now some years into the recession, companies still have not grasped that cash is king.

Who is to blame for this accounting disfunction? In the first place, management, many of whom have no formal training and have to rely on their accounting function.

In the second place, the finance directors and accountants who often see themselves as a necessary evil rather than a function that can add value. Too often I hear them say, "Nobody asked us for any management information." To me, such a statement is grounds for dismissal. Even when the accounting is outsourced, the service provider should send management information, even if the client does not ask for it. That's what I do for my clients - no complaints yet...

Tuesday, November 27, 2012

Taking Bad News

As a financial consultant, I am usually taken on by people who have managed to get themselves into a mess, for a variety of reasons. Obviously their objective is for me to sort out the mess so that they can get on with their work and often their life.
So far so good.... At least they, or one of their friends, have identified that they need help.
The problem, which is common to all of the ways that they may have got into that mess, is that to sort it out they have to admit that a bad decision was taken. In fact, the need for my services usually arises because they have failed to face up to this in the past.
It is human nature not to want to face up to our mistakes. But that is the road to ruin for an enterprise. So my assignments tend to terminate when difficult decisions are not taken because management are not prepared to admit their errors.
If the denied mistake is a game-changer, my assignment will be over very quickly. In others, we have managed to sort out many problems before reaching the uncrossable bridge. But what I find completely unacceptable is to be told by management, once presented with the least prejudicial solution, that the problem will be swept under the carpet. It is always better to take a decision, even a wrong decision, than not to take a decision at all. One can only question the integrity of such managers; technical competence is already ruled out.
Thankfully there is no shortage of potential clients. Making mistakes is a key part of business risk taking. I expect to be busy for quite some time.

Sunday, November 25, 2012

Self-employment

As I said in a post over a year ago, the problem with being self-employed is that we can work 24/7. There is no right to time off.

And so it has been, for the last 18 months. Loads of flights, various clients competing for my time, different problems and management styles in an economic climate that has gone from bad to nightmare. So much to blog about and so little time.

How the world has changed: the economy, the people, the net. Well I'm back today, taking stock. I hope that I will have time to make a few posts before being snowed under once more with other peoples' problems...