THE ACCA BLOG

Brand new blog page

ACCA has a new blog page on Wordpress.com

ACCA has a new-look blog page which has more eye-catching features to go with the interesting blogpost content.

Our blogs now features videos and images – take a look at our recent blogpost called ‘Accountancy as a second career’, which is about ACCA member and former Gold Medal winning student Lauren Lockwood, talking about moving into an accountancy career from retail.  

If you are interested in a particular area of accountancy or issue, there are ‘Tags’ and ‘Categories’ boxes to help get you started with your search.

If a particular ACCA blogger’s posts is of interest to you, you can also search for them by their names via the ‘Popular Posts’ box.

You can also read blogposts by month from the ‘Archives’ box, or get our new blogposts directly to your email inbox by subscription.

Enjoy our new blog page and we welcome any constructive feedback you may like to give about it.

Accountancy as a second career

Changing careers is a big decision to make, especially if you have no qualifications to fall back on, but that shouldn’t put you off. Lauren Lockwood, ACCA member and former Gold Medal winning student, explains how she moved from a career in retail to accountancy

I decided I wanted a change of career after working for 7 years in retail. My role was very sales focused but I had started to become involved in payroll and other financial matters with running a retail unit. I really enjoyed this part of my job, however, it was only a small part of the role.

I went to see an adult career adviser and explained that I enjoyed working with numbers and managing budgets and he suggested that I should aim for a career in accounting. He helped me to update my CV. He pulled forward the areas that were key to a career in accounting such as organisation, time management and accuracy. He also explained that I would need to gain a qualification if I wanted to progress in this industry and he suggested ACCA as I had no previous experience in this area, no academic qualifications past my GCSEs and at the time I was not working in accounting.

I was really excited at the prospect of going back to college and at first I was really positive and I couldn’t wait to embark on my new career. However, it was not quite the fairytale I had imagined.

I applied to every accountancy firm in my home-town and neighbouring cities, explaining that I was really keen to become an accountant and that I was looking for a role with them to start my accountancy career. Although some of the companies did respond to let me know there were no vacancies, most didn’t even reply.

I was also applying for jobs online during this period, most through agencies, but the majority wouldn’t even consider me as I had no experience in the field.

I was recalled for a second interview which was looking for a school leaver at GCSE level to embark on an apprenticeship scheme, but in the end the role went to someone else. I was feeling quite deflated and I was desperate for an organisation to recognise my accountancy potential.

Fortunately a recruitment agency called Sewell Moorhouse replied to one of my applications and they thought they would be able to help me find a role. Very quickly they had an interview lined up for me; I didn’t get the first one but I received some very good feedback and I was ready to try again.

The second one which I applied for was to cover the maternity leave of a Purchase Ledger Junior with a company called Bramall Construction where I got the job. I was a little worried at first at being a junior when I was 23, but I shouldn’t have been as the company was fantastic. I worked very hard and I really loved the role. It was completely different to what I had imagined and involved a lot of administration but it turned out I was a natural at it and I just couldn’t believe it had taken me so long to get into accountancy.

This was only a temporary assignment so I was still looking for a permanent position while I studied. Sewell Moorhouse found me a role as a Sales Ledger Administrator at ABP UK, I am certain that one of the things that helped me to get the role was that I was about to start to study for my ACCA and it demonstrated that I was committed to improving myself and that with time I would be able to offer a lot more to the organisation.

That was five years ago and I am still with ABP UK. I have been exposed to many areas of accounting during my time with the company, gaining experience in Sales Ledger, Purchase Ledger, Management Accounts and I am currently supporting the Financial Accountant in her role.

I am delighted that I was able to change careers when I did and I have enjoyed every second that I have worked in accountancy. During the last five years I have finished my exams and I have also achieved a First Class Honours Degree with Oxford Brooks University, through ACCA.

It has been very hard as I have had to study as well as work full time but I wouldn’t change a second of it. I would recommend accountancy to anyone who enjoys working with numbers, keeping organised and being busy.

Networking, where to start and making the most from the contacts you make

Networking is hugely important in business today, but not everyone is a natural at it. Sharon Critchlow compliance and operations director of Bristol based financial planners Citimark Partnership and a member of ACCA Bristol members' network gives some simple yet highly effective tips. 

13 years ago when I moved to Bristol I was faced with the unenviable task of making new friends; not just personally, but professionally. Having recently moved in to the Financial Services sector I was facing the task in hand with a group of professionals, 90% of which are male and at least 10 years older than me. So with few obvious things in common, and having stood in the corner waiting in vain to be spoken to, I developed an action plan – as without one, my business would never take off. As with any process, the more you work it, the easier it becomes. 

Top Tips

1         Practice with the home team. Try ACCA events as there are few natural networkers, your efforts will be really appreciated. Don’t want to speak to a total stranger? Try starting with the organiser of the event – they are there to put you at ease.

2         Seek out someone on their own and speak to them. A smile, eye contact and an outstretched hand are rarely ignored. You will not be the only one in the room who is reticent to make the first contact. In fact, it will probably be a relief to them.

3         Decide on your first line and be able to describe what you do.  Practice it! “Hi, I am Sharon and I don’t know anyone here” usually works, but also “I thought I was never going to get here – the traffic is terrible!” is a favourite as it is likely to be a common experience.    

4         Offer to introduce your new contact to someone else you know in the room – or ask if they know anyone that they can introduce you to?

5         Give them your business card and prompt theirs. Send them an email the next day, preferably link to them on LinkedIn.  A quick one liner will suffice  - “Good speaker last night – see you at the next one!” or offer to help with a bit of free advice as and when they need it.

6         Keep in touch from time to time – the odd article about their industry, congratulate them on their successes – carry on the conversation, but keep it light. 

 

Guest Blog - Employee Ownership - Impossible to Ignore

Iain Hasdell is the Chief Executive of the Employee Ownership Association the voice of employee owned businesses in the UK

The report of the independent Nuttall Review into barriers to employee ownership in the UK has just been released at a Summit on employee ownership chaired by the Deputy Prime Minister.

This marks another important step along the way towards employee ownership becoming a central part of industrial policy.

And, critically, it will feed directly and very strongly into the separate review of employee ownership taxation that was announced recently by the Chancellor.

The Employee Ownership Association, the voice of employee owned businesses in the UK, very much welcomes the key recommendations in the Nuttall Review, having pushed hard for the Review to take place and having been closely involved in its work.

Businesses that are owned by their employees contribute over £30 billion to the UK economy each year.

And employee owned business tend overall to have higher productivity, greater levels of innovation, better resilience to economic turbulence and more engaged, fulfilled workers who are less stressed than colleagues in conventionally owned organisations.

Even a cursory look at the compelling success stories of employee owned businesses such as Gripple, Clansman, Childbase,Unipart, and Sutcliffe Play demonstrates the very special value of employee ownership.

Chapter 2 of the Nuttall Report summarises the empirical evidence on the unique performance of employee owned businesses.

The EOA is massively enthusiastic about the content of the Nuttall Report.

The diagnostic sections go to the heart of the main challenges to be overcome in growing the number of employee owned businesses.

And the prescriptionsare compelling.

Nuttall recommends a major campaign to raise awareness of employee ownership options.

He calls for much more progress at a faster pace on creating better access to finance for businesses that want to implement employee ownership.

He points to the need for a more modern approach to some elements of the taxation system that affects employee owners.

He recommends the simplification of employee ownership models through the development of simple toolkits and ‘off the shelf’ templates to cover tax, legal and other regulatory considerations – what the Deputy Prime Minister is calling ‘employee ownership in a box’.

AndNuttall urges business and government to work together to remove the key barriers to employee ownership.

And that brings me to one of those barriers – the role of financial advisors - which the report discusses in several places.

Put simply the majority, with some brilliant exceptions, of accountants do not yet understand employee ownership, the various models that are available, how to finance transitions to employee ownership and how corporate financial governance needs to work in businesses that are owned by their employees.

Consequently they are frequently found wanting when it comes to serving the needs of clients who are pursuing employee ownership.

Too often, either as auditors, or commercial advisors, accountants default to the PLC world in which they are regularly most comfortable.

This militates against employee ownership in favour of sales of companies to competitors and/or management buy outs.

This is nobody’s fault – this is not about ascribing culpability.

But it is a significant challenge that the profession has to overcome.

It has to start at the grass roots – with employee ownership becoming a much bigger and integral part of the learning and qualification process for those in the accountancy profession.

And be reinforced within professional service Firms through the creation of many more teams who achieve genuine expertise in employee ownership matters.

This is perfectly plausible.The ordinary disciplines of market demand and supply will lubricate progress as the number of employee owned clients grows. It is now too big a business opportunity to be ignored.

The Nuttall Report sets out an array of work for the EOA to take forward, including collaboration with the Employee Engagement Taskforce and also building on the Breedon Review on access to finance.

As part of that agenda of practical next steps we are looking forward with confidence to helping the accountancy profession pick up the gauntlet of employee ownership in a very positive way.

When the profession does this it will be a vital contribution to the future growth of employee ownership in the UK.

Particle physics and the significance of accountancy

By David York, head of auditing practice at ACCA

The Higgs Boson is no doubt feeling rather exposed right now, which probably makes a change from feeling hunted. Even the Financial Times has gotten excited about the discovery.

The news recently has been full of the discovery of what some have dubbed ‘the god particle’, a fundamental building block of the universe that gives other particles their mass. Actually it is a bit more complicated than that – trust me I’m a physicist – or at least I have a degree in physics which is a starter. You will see from the job title that these days I am more of an auditing expert, so what is the connection?

When I joined the accountancy profession straight after university I was surprised to find that accountants were better experimenters than the scientists. A scientist reports the results of an experiment, plus or minus the margin of error, but an accountant can estimate the value of work in progress to the nearest pound. That is why financial statements balance - but in reality it’s all a bit of smoke and mirrors.

Auditors are also in an envious position in comparison to scientists because they can form a judgement, and report only that ‘in our opinion the financial statements give a true and fair view’. The auditor’s smoke and mirrors are hidden elsewhere in the report where readers are told that the evidence the auditor bases the opinion on is sufficient to ‘give reasonable assurance’. Actually it is a bit more complicated than that – trust me I’m an auditor.

In fact, it’s so complicated you would probably find the standard model of particle physics easier. To make a start on that you could do worse than the BBC's Q&As about the Higgs Boson. 

But one thing in all the news coming out of the Large Hadron Collider (the Cern Giant) that I found strange yet charming was the life breathed into Sigma – a Greek letter that has unfortunately never been as popular as Alpha and Omega. The physicists analysing the results applied a test of statistical significance call 5-sigma – and achieved instant popularity because it would have been less catchy to have to refer to five standard deviations; although that itself might make a boson blush.

5-sigma means that there is a 99.99994% chance the results are right. Which seems pretty certain, although perhaps only what we should consider necessary for something so important. 

So what about audit opinions? They are important too – just ask yourself how much the global capital markets moved on the announcement of the Higgs Boson discovery! Well as I said such things are complicated. But think 2-sigma (95.5%) or 3-sigma (99.73%) as a maximum – not quite the certainty the Higgs Boson has required.

Who has it right? You choose.

WHAT FINANCE LEADERS WANT FROM SHARED SERVICES AND OUTSOURCING

By Jamie Lyon, head of corporate sector at ACCA

The benefits of finance transformation and the adoption of alternative finance models such as shared services and outsourcing — transparency, lower cost, greater efficiency, standardisation and improved governance, and more – continue to be lauded.

Recently ACCA spoke to finance leaders from 20 of the world’s leading global brands to discuss their views and perspectives on finance transformation and the use of shared services and outsourcing.

Client organisations such as Coca Cola, Kimberly Clark, Shell, Unilever, Pearson and WPP shared their client insights on the successes, or otherwise, of remote delivery in the finance function. The analysis was complemented further from key advisory firms Deloitte, KPMG, PwC and Ernst and Young, as well as key business process outsourcing players such as Accenture and IBM. Critically, we asked participants what are the finance transformation issues that kept them awake at night?

The report, Finance Transformation: Expert Insights on shared services and outsourcing makes for interesting reading. For example, some leaders use shared services and outsourcing as a functional finance fix, improving the “factory,” while others see shared services and outsourcing as having a greater purpose — transforming the business, not just stopping at a better finance function; focusing on fixing the end-to-end business processes. Using finance transformation as a catalyst for business change, typically brings into play greater complexity and requires the finance function to be truly connected and influential across the organisation to drive the change process.

This brings me nicely on to the concept of change. Change management was cited across leaders as being the biggest challenge, underestimated often at the outset of the journey, and insufficient change management capability being evident to manage the transformation process effectively. The retained finance function was also cited as another key challenge. How do you truly make the retained finance function tick with the shared service/outsourced delivery to drive the optimal finance function, and how do you develop those entirely new relationship management and governance skills to make these new finance models work?

After the initial benefits of implementation had been gained (cost reduction, standardisation), finance leaders also recognised the business they are serving don’t just want a better finance function per se - they also want to see what else the finance functions can deliver. For finance leaders, their internal business counterparts continue to look for ‘more’ — how do I get more cash, more information, more service, more intelligence, more cost out from finance? It’s a big ask for finance leaders to meet, and the solutions are not cut-and-dried. For finance functions adopting shared services and outsourcing, the report suggests there is plenty more to do to unlock all the value and meet business needs. Undoubtedly, however, one point came through very strongly across the board - there’s no turning back from finance shared services and outsourcing.

Mentoring: good for mentor, good for mentee

Anita Brook, Managing Director of Accounts Assist UK Ltd and vice-president of ACCA's practitioners panel explains how mentoring is good for both the mentee and the mentor

 

We all start somewhere. We’ve all taken the first steps in our careers and at times could have done with some additional support. This is why having a mentor can be an essential link between knowledge, experience and support.

Typically within the accountancy sector a mentor will be a fully qualified accountant with a number of year’s frontline experience. A mentee is normally a student studying for ACCA accreditation, or a degree in accountancy or they are already a practicing accountant at junior level. 

 

The mentor and mentee both gain from the mentoring experience in difference ways. A few are listed below:

Benefits for the mentor:

• Get to reflect on their own experience and knowledge
• Gain an insight into the younger side of their own industry 
• Gain an insight into new/current teaching methods
• A way of being close to current issues as they happen
• Recognised at work for getting involved and giving something back in a positive way
• Can be a great way to spot talent for future recruitment campaigns

 Benefits for the mentee (student):

• Having a mentor is an important form of learning during the early stages of a professional career
• Mentors offer real experience and working knowledge that cannot be gained from textbooks or the internet
• Access technical support. A mentor traditionally has a higher qualification level, typically a qualified accountant with a number of years experience
• A mentor can provide an independent, yet experienced voice that isn’t work or education focused
• Can advise how to balance workloads and set priorities 
• Mentors can share work place do’s and don’ts
• Provide networking opportunities and other important contacts
• A mentor can be a positive force to push a mentee forward to achieving professional goals and qualifications
• A mentor can also become a mentee’s champion. This could be for further opportunities within the business or wider industry

Both mentor and mentee benefit from the relationship, and when undertaken in a business environment it can have a positive effect on the team’s working relationships.

Directors’ Liability Health Check

by Gillian Sayburn ACCA member and Insolvency Director at Begbies Traynor (Central) LLP

The concept of limited liability for limited companies (including LLPs) is, in the event of the failure of a SME business, often a false belief.  An awareness of the areas where an SME director may be personally liable could help to minimise or avoid such liabilities should their business fail.

There are three main areas where directors can find themselves personally liable: liability under a personal guarantee; liability under contracts; and liability as a result of their failure to carry out their duties as a director which may then be challenged by an Insolvency Practitioner (IP) under Insolvency Act 1986 offences.

Personal guarantees are often given in respect of bank borrowing, company credit cards, property leases, hire purchase, lease and finance agreements.  Should the business fail, a creditor with a personal guarantee will call on this personal guarantee. Where there are two or more guarantors, then the guarantee will usually be ‘joint and several’ whereby the creditor can pursue any director for the full amount.  Guarantees may be either limited or unlimited in monetary terms.

Personal contracts and personal liability often occur where a company was formerly a sole trader or partnership and following incorporation, the proprietor did not legally and effectively transfer contracts he had entered into personally into the name of the limited company.  The director will remain personally liable. Alternatively, the creditor may consider that they have contracted with the director personally rather than with the company.

Should a company be placed into a formal insolvency process then the Insolvency Act contains various provisions which are designed to provide relief for creditors when directors have failed to fulfil their duties as a director.  A claim may be brought under one section or several sections of the Act which we will now briefly comment upon.

Misfeasance (s212 Insolvency Act 1986)

The court may make an order against anyone who “…. has misapplied or retained, or become accountable for, any money or other property of the company, or been guilty of any misfeasance or breach of duty of any fiduciary or other duty in relation to the company”.

Increasingly in insolvencies, we are finding directors with overdrawn directors’ loan accounts.  Leaving the legality of loan accounts aside (dealt with under the Companies Act 2006), the IP will seek to recover these funds from the director. Unauthorised loans may in some circumstances be recoverable from all directors on a ‘joint and several’ basis

Another area that is often discussed is the payment of dividends rather than remuneration to save PAYE and NI usually where the director and shareholder is the same person.  The company may have made dividend payments at regular stages throughout the year at a time when the company did not have sufficient distributable reserves to make the dividend payment.  The IP will seek to recover such ‘illegal’ dividends from the shareholder.  The director may also be liable, as he has authorised the payment – again, it is a ‘joint and several’ issue.

Wrongful Trading (s214 Insolvency Act 1986)

When a director allows a company to continue to trade and incur liabilities when he “knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation” then the director can be liable for wrongful trading.

An example would be the company taking on a new supplier and incurring credit when the director was aware the company would not be able to pay.  In this case, he could become personally liable for the additional debt incurred by the company beyond the point, viewed with hindsight, when “he knew or ought to have concluded….”. Again a ‘joint and several’ issue if there are two or more directors.

Transactions at an Undervalue (s238 Insolvency Act 1986)

A director allows the company to enter into a transaction at an undervalue where the company makes a gift for no value or enters into a transaction where the value received is significantly less in money than the value given.

An example would be where a director may sell a vehicle or piece of equipment to himself and in return he injects some cash into the business, but less than the value of the asset.  In this case the IP would look to the director to pay the difference or return the assets.

Preference (s239 Insolvency Act 1986)

This is where the company does anything that puts one creditor in a better position than it would have been.

An example is where a director knowing that the company is close to failure repays to himself his directors loan or repays monies owed to friends and family or settles a debt where the director has given a personal guarantee, thereby  putting him in a better position than other creditors.

This list is not exhaustive but gives an indication of areas where, should a business fail, the directors may face personal liability.

Should a director believe his company is at risk of failure then, in order to minimise his personal liability, he should seek appropriate and relevant advice sooner rather than later and act on it. 

Such early independent and professional advice will help the company meet its legal requirements and provide evidence that the directors are aware of their duties.  Directors should hold regular board meetings and maintain a record or minutes of the meeting.  These minutes should show the directors are aware of the financial position of the company and detail the steps they are taking to ensure the creditor position does not worsen.  The company should maintain up to date management accounts and circulate to all directors and retain evidence that they have been used for example when considering taking on new creditors or disposing of assets, agreeing dividends or loans.

 

Back to the financial future...

A couple of financial stories this week have made this observer delve back into his archive.

The ongoing success of Nationwide, by far the biggest of the UK's remaining building societies, was highlighted by the Independent newspaper, which compared its achievements to the miseries which have affected the banks in recent years. The paper rightly celebrated the fact that Nationwide, almost alone, had fought against the tide of demutualisations of the 1990s.

Back in 2006 I wrote a report for Parliament on the demutualisations  and I, too concluded that Nationwide's independence was something to cherish - not only because, on balance, the building societies offered consumers not only a better deal on products and services but that the sector relied, to an unhealthy degree on Nationwide to show that mutuality was still sustainable at a large scale organisation. And I believe that it deserved, and still merits, praise for not joining the herd.         

But it would wrong not to 'fess up to things which proved to be wrong. For which was the organisation I pointed to, as the 'main success story of the demutualisers' six years ago? A certain Northern Rock, which notoriously crashed 18 months later. At the time of the report, Northern Rock was growing exponentially and seemingly doing everything right. So I can join the massed ranks of pundits who did not see the crisis to come. Did anyone?

And just when banking regulation seemed to have left the front page, the crisis at JP Morgan has brought it right back again. In 2009, after the financial crisis had reached full speed, ACCA put together a report which looked at principles of good regulation. We argued that the 2008 crisis had sprung largely from poor governance in banks and the creation of over-complex giant organisations in which risk management functions did not have sufficient clout, and management too often had insufficient understanding of the financial products that were being sold.

Of course, we await the full story of the JP Morgan crisis. But from the outside it seems déjà vu. Regulation can usually be improved and, to work most effectively, we argued, have the buy-in of the organisations being regulated. But outright opposition to a regulator is rarely a good option. As the Independent rightly points out modern capital markets are complex places that require complex regulation. But if If JP Morgan chief executive Jamie Dimon reckons the Volcker Rule on proprietary trading is too complex to implement, it follows his bank is too complex too.

Just a bunch of accountants?

By Ian Welch, head of policy, ACCA
The half-jokey jibe at the profession which UK Prime Minister David Cameron made recently, when he said he did not want his government being just 'seen as a bunch of accountants' has upset some of the professional bodies, two of which have gone into print to complain.

While I think the comment should be seen in the throwaway spirit it was intended, there is a more serious issue involving the government and accountants. Since the onset of the global financial crisis, qualified accountants have played increasingly central roles in businesses, providing greater input into strategy and working well outside of the traditional finance function.

But at ACCA's recent symposium of its global forum chairs, there was a general consensus that the profession was in some ways under siege - the ever-increasing regulatory burden aimed particularly at larger entities means finance directors may be too bogged down with compliance that they will be unable to devote enough time to enhancing business performance. Which is not what economies need right now.

Auditors too, are under relentless political and regulatory scrutiny across the world, following the crisis. And with audit being the best-known part of the profession, all accountants will suffer in reputational terms if auditors remain under sustained fire. And while ACCA agrees that audit needs to evolve and widen in scope, let’s not throw the baby out with the bathwater.

Governments need to be more aware that finance professionals can play a crucial role in generating economic recovery. Consider a few of the typical things that accountants do: the preparation of financial statements, the provision of strategic guidance for business, or the provision of assurance services. At the SME level surveys  consistently show that accountants are the top advisers to these businesses.

And accountants are also involved in redefining what business success means. Given the effects of the financial crisis – recessions, job losses, austerity measures, and continuing crises of confidence – the accountancy profession is increasingly looking at how we measure true value. Do we just look at balance sheets and profit statements, focusing just on the financials, or do we look at the wider value that business brings to the public and society? Our work on sustainability and more recently integrated reporting, is aimed to ensure that business performance is judged in the round. And by putting their ethics training into action and following through on the values of the profession they represent, qualified accountants have the opportunity to spread the public value message throughout the business world.

The accountancy profession is strong enough to withstand a few jibes and jokes. Ever since the famous Monty Python sketch in the early 1970s, it has taken a good few blows. But governments need to realise that recession is not the best time to alienate the very people who will help business recovery by blaming them for the economic situation and piling on regulatory burdens. Let accountants and governments work together to solve our problems not battle against each other.