NQ magazine December 2016
P18
THE VOICE OF ALL NQs Contact us
email: graham@pqaccountant.com twitter: @pqmagazine facebook: pqmagazine.com call: 020 7216 6444
What you should be reading in your Christmas holidays
ALL THE NEWS YOU NEED
P10
and a whole lot more Pages 4 and 7
GENERATION NOW KAY ME sets the style for workplace fashion Page 12
ACCA UNDERTAKES WIDERANGING SURVEY INTO THE ATTITUDES OF YOUNG ACCOUNTANTS P8
CORPORATE CULTURE AND THE ROLE OF BOARDS REPORT OF OBSERVATIONS
July 2016
#culturecoalition
CORPORATE CULTURE The importance of a company’s culture cannot be overstated
P14
ETHICAL DILEMMA Completing a company restructure against the clock Page 22
A DISRUPTIVE FORCE How the mobile phone is changing the way accountants work
investing in people Senior Financial Analyst
FP&A Analyst
Retail, West London
FMCG, Surrey
£50,000 + benefits
£45,000 – £50,000 + benefits
• You will be a key part of the EMEA FP&A team, providing credible commercial decision support. • Responsible for delivering accurate and timely financial analysis and reporting, financial plans and commercial insight. • Ensuring that key stakeholders understand financial performance, providing challenge and support helping business deliver its KPIs. • Prepare daily sales reports built up by Country and consolidated at an EMEA level. • Build reports by customer at both a Gross, Net Sales and standard margin level, capturing the impact of Promotional Sales Credits and Rebates. • Distribute sales report and manage query resolution with Country Sales Managers. • Support the preparation and generation of regional country P&Ls.
• Conduct FP&A within the regional FP&A team, focused on executing standard processes based on maintaining internal service levels. • Support the production of the long-term plans for the region to provide a robust and timely strategic plans. • Support the execution of the Annual Budgeting and Forecasting process in the region to provide performance targets. • Lead the production of regional standard and ad-hoc Finance reports to serve customers and fulfil internal service levels. • Apply standard FP&A tools and processes in the region to simplify operations. • Responsible for performing and delivering state-of-the art FP&A activities including Long Term Planning, Annual Budgeting, Forecasting, Standard Reporting. • DCF Analysis, scenario analysis, business case development, business valuations, and operational modelling.
redefining financial recruitment T +44 (0)20 8408 9999 E info@walkerdendle.co.uk
www.walkerdendle.co.uk
COMMENT
NQ magazine £200
NUMBER CRUNCHING
Annual cost to some taxpayers of ‘hidden’ NI hike P4
EDITOR’S COMMENTS
Farewell to 2016, hello 2017 Where did 2016 go? It really will be Christmas soon and then we will be heading straight into 2017. But what do we have for you in our final NQ magazine of the year? Well, if there is one feature you need to read in this issue, irrespective of which body you qualified with, it’s John Williams’ piece on ‘Generation Next’ (see page 8). John is the head of ACCA UK and he reveals what happens when you ask 19,000 (that’s one big survey) under 36-yearold financial professionals about their hopes and career dreams. The global survey looks at everything from the rise of the robots to just how entrepreneurial Generation Next are. He emphasises that Generation Next is also ‘generation now’ when it comes to job mobility. There is no doubt that the ‘job for life’ is less prevalent within the modern world and employers who don’t deliver on their high expectations risk haemorrhaging their best talent to competitors. If employers want to keep hold of this talent then they need to ensure they provide the sort of work environment and clear path for progression that the best of the next generation demand. One thing we know is that many young finance professionals care about corporate culture. This is something that CIMA and the FRC have also been working on. And no, good corporate culture isn’t about colourful chairs and a slide in the office (although that sounds fun!). Openness and transparency are key here. But while many talk to the talk, how many actually walk the walk? Why do just 14% of FTSE 100 companies discuss corporate culture in their annual reports? Finally, don’t forget there is still time to enter our sister publication’s awards. Could you be our NQ of the Year? Check out page 4 to see just how easy it is to enter. Hope you have a great Christmas and see you in 2017. Graham Hambly, Editor (graham@pqaccountant.com)
19,000
Number of young accountants surveyed by ACCA for it Generation Next report P8
14 %
of FTSE 100 companies discuss company culture in their annual reports P10
2011
Year former PwC staffer Junko Kemi started fashion brand Kay Me P12
65%
percentage of adults who prefer to use a smartphone to go online P14
4
Number of great books reviewed in this issue P18
NEWS
Be our NQ of the Year
In an uncertain world, many people choose to stick with what they know
Making a career switch Good news – the deadline for nominations for NQ of the Year has been extended. You now have until Monday 9 January to get your entry to us. Our lush venue, the Café de Paris, is now booked, as are the judges. We have even gone to the expense of cleaning the red carpet for the awards that will take place (with or without you) on 21 February. Isn’t it time you brightened up a dull February night with an invite the best accountancy awards out there? All we need is just 250 words on why you should win one of our gongs. Remember, there is more than NQ of the Year up for grabs. We also have a Team of the Year and Training Manager/Mentor of the Year awards among others. Just got to www.pqmagazine.com and click on the ‘pq awards’ bar and download the nomination form. Or you can email your wise words direct to us at awards@pqmagazine. com. But please make sure we know what category you are entering.
NI rise comes in under the radar The government has imposed a tax rise of £200 a year for people earning more than £43,000 through a change in national insurance. The changes were part of the Autumn Statement, but Chancellor Philip Hammond made no mention of the measure, simply listing the changes in the small print of policy documents released after his House of Commons presentation. Effective from April 2017, it means the salary level on which most employees have to pay 12% national insurance tax has been increased. Currently, workers pay 12% on annual earnings up to £43,000. Above that they are subject to a 14% rate. Now people will have to pay 12% up to the new £45,000 upper earnings limit. Under Treasury forecasts this tax take will be considerable – it could bring in a whopping £38bn into the Treasury over the next 10 years. Over that same period the corporation tax take is set to rise by just under £10bn. PwC’s Lindsey Kutten went as far as saying: “ Looking at the detail supporting the Autumn Statement… the chancellor is not fully passing on the income tax reductions to middle and higher earners.” 4
Six in 10 accountant would like to make a career switch to industry or practice but don’t know how to do it. Despite the desire to swap places nearly half (43%) admitted there are issues holding them back from making the jump, according to new research from CareersinAudit.com. For more than a quarter (26%) it was felt too risky to move in the current economic climate. A fifth (20%) said they did not have the right skills and some 17% were worried that it would not be as they imagined it. A further 12% believe that there is currently too much competition out there for jobs. CareersinAudit’s Simon Wright said: “For professionals looking to move from practice to industry it is often thought of as an easier move, but it is not always the case. Commerce and industry work expectations and company culture in general are often overlooked as contributing factors and potential issues to consider and the change can come as a shock. With less defined study structure and focus it can take longer to complete qualifications than in practice.”
Chancellor Philip Hammond has abolished the Autumn Statement. He said that no other country makes major tax changes twice every year. So the Spring Budget 2017 will be the last, and there will be a second Budget before the end of 2017 to switch to the new timetable. We will then move forward with an Autumn Budget. The Finance Bill will follow the Budget as it does now. Hammond said this was long overdue reform and will help parliament to scrutinize the tax changes before the tax year where most take effect. From 2018, under the new timetable, the day (‘Legislation day’), when most tax policy consultation summaries and draft Finance Bill legislation is published will move to the summer. For this Autumn Statement the current ‘Legislation day’ is 5 December. There will be a Spring Statement moving forward, where the Chancellor will respond to the updated OBR forecasts for the economy and public finances.
NQ Magazine December 2016
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CMYK / .eps
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www.howett-thorpe.co.uk
real jobs real people FP&A Analyst
Financial Accountant
Surrey £40,000 -£45,000 Reference number: HT13163
Surrey £28,0000 - £30,000 Reference number: HT13247
About The Role
About The Role
Howett Thorpe are partnering with a Global Technology Company in recruiting a FP&A Analyst. This dynamic and progressive business, operating across 18 countries, offers a unique solution and experience to its clients with its state of the art technology.
This leading worldwide business within the Services sector is looking to recruit a progressive and career focused part-qualified Financial Accountant. This business is able to offer fantastic commercial exposure, career development and the opportunity to work for a leading and progressive international brand.
Reporting into the Senior FP&A Manager, this position will be responsible for the preparation of planning and forecasting models and financial controls across its remit. This role will ensure the integrity of financial information across the financial systems whilst maintaining the cash flow models, financial and operational forecasts and providing analysis required for planning and audit. This position will see you working with a variety of finance and non-finance individuals for both Internal and External planning, often working to challenging deadlines. The right candidate will be an experienced Analyst within a Financial Planning role. We are looking for a strong communicator with the ability to influence at Senior Management level and work in a complex matrix organisation. They must offer excellent excel modelling and systems skills, ideally wth exposure of SAP and/or Cognos.
About You: ● ● ● ●
Finalist or Newly Qualified Accountant - ACA, ACCA or CIMA Big company background Extensive technical accounting experience Exposure to working at Group level and with stakeholders
Weybridge Office T: 01932 901 900 E: weybridge@howett-thorpe.co.uk
Reigate Office T: 01737 304 050 E: reigate@howett-thorpe.co.uk
This role will report directly into the Financial Reporting Manager and support the production of monthly financial figures and maintain the day-to-day financial accounting systems. Responsibilities will include: ● ● ● ● ● ● ●
Maintain and produce journals and P&L accounts Provide Analysis relating to results and on an ad-hoc basis Take responsibility for the Fixed Asset Register Reconcile the balance sheets Maintain the prepayments and intercompany accounts Support the Financial Reporting Manager in month end reporting Prepare monthly VAT reconciliations
Working in a fairly small team, it is vital that the right candidate has a ‘hands on’ attitude, is hungry to learn and willing to go that extra mile for his/her team. You must be a dedicated studier (ACCA or CIMA), ambitious and dedicated to developing your career. This organisation offers an extensive study package and a mentoring and supportive management team, 25 days holiday and a competitive pension contribution scheme. For more information, please contact: Cheryl Ramsden 01252 718777 cheryl.ramsden@howett-thorpe.co.uk
Slough Office T: 01753 313 033 E: slough@howett-thorpe.co.uk
Farnham Office T: 01252 718 777 E: farnham@howett-thorpe.co.uk
NEWS
Criminal Finances Bill becomes the law Indian clampdown on the cash economy In a shock move that had led to many deaths, the Indian government ‘discontinued’ the 500 and 1,000 rupee notes without warning at midnight on one Tuesday night in November. The government said it wanted to curb corruption, counterfeiting and terrorist financing. Banks and cash machines were closed for 48 hours, reopening with replacement new notes. Everyone has until 30 December to exchange their old notes. However, the scrapped denominations account for 86% of all Indian bank notes in circulation. Indian is an economy where cash is still king. It has been claimed that businesses use cash to avoid paying taxes and in 2011 a study estimated that corruption had cost the Indian economy more than £320bn over the previous decade.
New legislation to tackle money laundering and corruption, recover the proceeds of crime, and counter terrorist financing has been published in the form of the Criminal Finances Bill. Among the measures being introduced is a new criminal offence for companies that fail to prevent tax evasion. The government says the new bill will also strengthen the partnership between the public and private sectors, boosting the fight against illegal activity. The bill enables more sharing of information between regulated companies. New powers will be created to assist investigations, including a power to extend the moratorium period in which Suspicious Activity Reports (SARs) can be investigated. Another new measure is the unexplained wealth order, which will force those suspected of serious crime to explain where their wealth has come from or risk having it seized. The bill also puts in place an extension of disclosure orders to money laundering and terrorist cases, requiring someone suspected of having information or documents relevant to an investigation to provide it.
Making all annual reports Accountant fined for clear and blocking investigation conscise Middlesex accountant Anil Shah has been fined £25,000
Annual Report and Form 20-F 2015
BP Annual Report and Form 20-F 2015
The Financial Reporting Council (FRC) has issued advice, in the form of a letter, to preparers of annual reports. The annual report, explains the FRC, provides an opportunity to communicate key information to investors about a company’s performance, strategy and future prospects. The strategic report should therefore be presented in a userfriendly, clear and concise manner. In an era of cyber-risk, climate change and Brexit economic, social and environmental uncertainty, the FRC wants to encourage companies to consider a broad range of factors when determining principal risks and uncertainties facing the business and performing their analysis for a viability statement. The letter explains that investors expect the relationship between IFRS or UK GAAP measures and any alternative performance measures used to be clearly explained. The FRC also believes that business model reporting must provide clarity of explanations of how the company makes money and what differentiates it from its peers. The letter goes on to call for a clear link between the business model and the revenue recognition policies to be disclosed. Finally, dividend disclosures should detail how dividend policies operate in practice and how these policies may be impacted by risks and capital management decisions facing the company. bp.com/annualreport
NQ Magazine December 2016
under the Serious Organised Crime and Police Act for failing to comply with disclosure notices. Despite being served with legally binding documents, Shah refused to assist HMRC officers who were investigating suspected tax evasion by his clients. The disclosure notices require individuals to share paperwork and information with HMRC when part of a criminal investigation. Shah ignored these and lied by claiming he didn’t act for the clients involved when he did. Two of Shah’s clients were jailed for seven years in 2015 for a £1.2m VAT fraud. A further trial of a number of his now former clients is due to conclude at the end of this month. Shah has been warned that if he does not pay the fine within 28 days he will face 18 months in prison.
HMRC to use ‘big data’ HMRC has said that ‘big data’ will be an increasing source for the revenue in carrying out tax investigations, according to HMRC’s Gill Aitken. Speaking at a recent conference, she said that the already substantial use of big data by HMRC will increase over the next few years to help identify taxpayers who are underpaying tax. 7
YOUR CAREER
Generation Next is
‘generation now’ A comprehensive survey from ACCA unveils the hopes and aspirations of an upcoming generation of accountants, says John Williams
R
eading this as 2017 approaches, you’re probably thinking of what next year holds for you career-wise. This was the simple premise for ACCA’s recentlylaunched report ‘Generation Next’, one for the largest surveys across the global profession looking at the hopes and career dreams of 19,000 under 36 year old finance professionals. Training and development, career progression and promotion – and of course salaries – are the main priorities of the ACCA students, affiliates and members who all responded to make Generation Next a definitive insight into what matters for young people and their careers. What we found globally is that young finance professionals are ambitious – they are looking for a career promotion or a jump to a new job within the next two years. Almost threequarters – 70% – of respondents are looking to move jobs soon, with 67% looking for a promotion. Respondents also indicated they were more likely to stay with an employer if offered the opportunity to learn and develop skills (88%), career progression opportunities (88%) and a competitive financial remuneration package (87%). What this shows is that future finance leaders are happy to seize the initiative in the labour market to achieve professional satisfaction. They know that demand for their skills is high and if their employer isn’t delivering they won’t wait around. The results mean that employers can’t attract, nurture or retain the finance leaders of tomorrow in the same way they did the leaders of today. This has clear repercussions for the labour market. The challenge for employers large and small is making sure they provide the sort of work environment and clear path for progression that the best of the next generation demand.
Aspiring entrepreneurs The survey results show that globally, respondents are keen to set up in business, with a large majority holding aspirations to go it alone. Generation next has grown up in the age of the start-up and they see themselves as part of it. This aspirational and entrepreneurial attitude varies from country to country. Young Nigerian finance professionals were the most keen to set up a business, with 95% saying this was going to be their next career move or later in their careers, compared with 81% globally and just 68% of UK respondents. 8
The ‘company woman’ Globally, while generation next employees of both genders sought rapid career progression, women respondents were more likely to show loyalty to their current employer than their male counterparts. The research showed that women are more likely to be happy with their current remuneration (36%, compared with 30% of men) and to expect to stay with their current employer in their next role (42%, compared with 37% of men). And while men and women were equally likely to seek roles on the basis of remuneration and career progression, the research indicated that women in generation next are still expecting to balance their job with family life. Women are more likely to accept a role on the basis of work-life balance (87%, compared with 69% of men) and flexible working arrangements (75%, compared with 69% of men).
Rise of the robots Much has been written recently about the threat of automation to jobs. But generation next understands that automation will replace the need for human capital across a number of functions. They are not threatened by this, seeing it as an opportunity to free up time for strategic activities. More than half (57%) of respondents believe that technology will replace many entry level roles in the profession. NQ Magazine December 2016
YOUR CAREER
However, 84% say that technology will enable them to focus on much higher valueadded activity.
Globally minded? We also asked whether respondents would like a role in a different country or region. Over one-third saw themselves pursuing a role in a different country in their next move, while 44% plan to move to another country or region later in their careers. Respondents in Nigeria, India and Pakistan were the most keen on an international career at 91%, 90% and 94% respectively. Those in Hong Kong at 57%, the UK at 62% and Ireland at 52%, were least likely to say an international role was of interest.
A great foundation There was global consensus among respondents that their training as a finance professional stands them in good stead for the future. In the UK, for example, 90% agree with the statement “a finance career background will be valuable for organisation leaders in the future”. Finance is clearly valued as a platform for future careers, whether someone stays in the finance function or not. Our report also explains how to navigate a successful career in finance, from building your own brand to looking for mentors to building your network. And we also offer guidance to employers based on this feedback. The loud and clear message from Generation Next is that career development opportunities are key to attracting and retaining talent. It’s an optimistic outlook for the profession and for those with drive and determination working within it. NQ ● John Williams, pictured, is head of ACCA UK
NQ Magazine December 2016
9
CIMA REPORT
Why corpora culture mat The importance of a company’s culture cannot be overstated, says Tony Manwaring
10
NQ Magazine December 2016
ate tters
CIMA REPORT
CORPOR CULTUREATE THE ROLE AND BOARDS OF
REPORT OF OBSERVAT IONS
July 2016 #cultureco alition
T
o some, corporate culture might sound like a small thing that – if moving in the wrong direction – can be fixed by giving staff a ping-pong table or making the office more colourful. But corporate culture is not just about the atmosphere within an organisation. It refers to a combination of behaviours, attitudes and values shown within a company and to shareholders, customers, suppliers and other stakeholders. Or, more simply, “it’s how we do things around here”. This means that apart from being linked to trust and the wellbeing of staff, it also critically shapes decision-making and long-term business success. A report published this year by the FRC’s Culture Coalition, of which CIMA is part, gives a better insight into the topic. ‘Corporate Culture and the Role of Boards’ is based on interviews with more than 250 company chairs, CEOs and leading industry experts. Although corporate culture is becoming increasingly important, only 14 % of FTSE 100 companies discussed it in their annual reports. Businesses need to increase their focus on corporate culture and recognise its value. By doing so, they will have a competitive advantage and ensure longterm value creation. But how can an organisation achieve a healthy corporate culture? Firstly, this needs to be done on different levels and has to start with the recruitment process. Everybody – and this starts with the appointment of the CEO – needs to know the important values NQ Magazine December 2016
right from the beginning and what kind of behaviours are expected. Otherwise, it can happen that a candidate is selected who might be suited to the role but does not fit in with the organisation’s culture. Secondly, management has to act as role models. Not only should they encourage what is regarded as the right culture, they themselves need to adopt the behaviours the company is asking for. This shapes the nature of trust within a business. When it comes to implementing the right kind of behaviour boards play an important role. One way to ensure this is by asking challenging questions and demanding access to information. Another way is to act when senior management is not incorporating the right culture, values and attitudes. Boards additionally need to realise when something is not in line with the organisation’s values and understand what drives certain behaviours that lead to bad decision-making. Only then can necessary action be taken. How a company communicates its business model helps give an insight into its corporate culture, especially for investors. It is important that boards and executive teams have a good understanding of their company and how it makes its profits. This impacts how decisions are being made and, in turn, how they influence culture. As cited in the FRC report, a business model framework such as CIMA’s ‘Rethinking the Business Model’ is essential in order to assess whether
behaviours and values are aligned with the purpose of a company. What should never be overlooked is that openness and accountability go hand-in-hand with a healthy corporate culture. People need to be able to speak up about issues that affect and worry them. This increases the level of trust, a vital contributor to corporate culture. Therefore, businesses need to have systems in place that give their employees the option to voice concerns and opinions and that leave room for responses. These systems also need to include policies that allow whistleblowers to come forward and to be treated fairly. In addition, openness and transparency have to be applied to reward systems. CEOs must ensure that incentives and bonus systems meet certain standards, are consistent with the culture and based on transparency. They also need to be aligned to and agreed in reference to their business model. If people get the impression that behaviours which act against their company’s core values are rewarded this sends the wrong signals, causes resentment and can ultimately damage reputations. But can corporate culture be measured? This can be a challenge as corporate culture is an intangible. Yet it is possible, using key measures as proxies such as engagement or feedback data. There is a simple way for CEOs to get some understanding of their company’s culture. By “walking the shop floor”, arranging site visits and talking to staff, messages – even quiet ones – can be picked up. Another way of measuring culture is looking at how often people make use of systems that enable them to speak up anonymously, e.g. employee surveys, or giving staff a forum to share ideas and voice concerns. This kind of engagement helps understanding of the drivers of corporate culture and allows early intervention. Boards need to be aware that it is important to devote the necessary resources so that culture can be evaluated and frameworks for assessment can be developed. They should not wait for a time of crisis to start looking into their corporate NQ culture. ● Tony Manwaring, Executive
Vice President – External Affairs at CIMA 11
WORKPLACE FASHION
Elegance in an instant
We met up with Junko Kemi, who is designing business clothes that all women would want to wear
F
ormer PwC consultant Junko Kemi always had a problem with the way women were expected to dress for business in Japan. She felt that there was little variation in the professional clothing available and believed what was on offer ‘minimised’ her femininity. “We were expected to wear tight, restricting suits, which just made us look just like our male colleagues,” she said. Rather than just conform to these expectations Kemi wanted to change things, and she was inspired to take a massive career jump and move into the heady world of fashion. Her fashion label Kay Me was born in 2011 in Ginza, Tokyo, and as they say the rest is history. She believes her designs are fashionable, comfortable and suitable for travel – the perfect outfits for the modern timepoor businesswoman. Kemi stressed: “Women in business need to create their own style, wearing clothes they feel comfortable in.” Kemi admits she does have a connection to fashion – her grandparents owned a kimono shop. These ancient designs inspire many of Kay Me’s original prints today. She admits one of the bains of her life at PwC was getting 12
all her suits dry-cleaned every couple of weeks. So her clothes are designed to be machine washable at home, iron-free and wrinkle-proof. Her dresses are also designed to make your morning set-up quick and stress-free. Kemi has patented her new washable silk design, and recently won the Development Bank of Japan Women’s Entrepreneur Centre Award. Kay Me also seems to be much more than a fashion brand. It currently offers English-for-business language classes for women helping to empower her customers even more. She has decided to bring her business clothes to the UK, and after the success of her pop-up shop in London’s Piccadilly last year now plans to have retail outlets ‘soonish’ in the UK. She told us that she is looking at London sites in the City and Canary Wharf. But if you can’t wait until then go to www. kayme.co.uk for more. At £300 a pop some of her dresses aren’t cheap, but they NQ are undoubtedly beautiful – and unique. ● This article first appeared in PQ magazine NQ Magazine December 2016
WORKPLACE FASHION
NQ
NQ Magazine December 2016
13
MOBILE WORKING
On the The powerful and fast-moving disruptive force of mobile is transforming the way accountants work, says Joel Oliver
A
ccountants, it seems, are the flavour of the month thanks to the success of a new film called simply ‘The Accountant’, starring Ben Affleck who works as a forensic accountant at an accounting firm. The ‘accountant’ tracks inside financial deceptions for criminal enterprises brokered to him by a mysterious figure known as ‘The Voice’, who always uses a phone to communicate with him. It’s no coincidence that the ‘accountant’ in the film is fed his information by phone as there can be no doubt that the use of mobile technology and the smartphone is changing the way we all interact and work. The rate of mobile adoption of devices such as smartphones and 14
tablets is helping to drive this change and in today’s world we are mobile; we consume our data on mobile and search on mobile. It’s the one device many of us cannot be without. As a result, mobile use is outpacing desktops and laptops. Today, the smartphone is the ‘glue’ that binds people and information, businesses and their clients together. Having replaced computers for internet use, two-thirds (65%) of all adults now use a smartphone to go online, according to the 2016 Ofcom report into ‘Adults’ Media Use and Attitudes’. And the average number of interactions a person makes on their smartphone in a single day is over 2,500. These devices are used for all kinds
g
of business activity: for talking to customers, for raising quotes, creating invoices, capturing receipts and for searching for information, guidance and help that is relevant to their business. A smartphone or tablet holds all that’s important to that person, whether its choice of music app, sports app or financial app. We may be oversimplifying this, but at a basic level the vast majority of the technological changes are happening in the mobile arena. Our habits have changed and while old habits may die hard, there’s no doubt client behaviour is changing too. Today clients use apps to find answers and to interact with the world in many different ways.
Capturing data digitally The transformation of the tax system by HMRC to fit the digital age presents an opportunity for accountants to harness the power of mobile technology and show clients that they are interacting in the way they prefer. Because businesses will need to electronically record their income and expenses and submit a summary NQ Magazine December 2016
MOBILE WORKING
go
of that information electronically to HMRC, accountants can help make the process simpler by providing a collection point for this data. And the most obvious place to collect and share this data in the new mobile world is via an app. A custom app quickly becomes the first point of contact for the client and it can also provide on-the-go access to online accounts and to the client’s accounting software of choice including Xero, Kashflow, Sage or Quickbooks, etc. The client submits all the core information required using the app in a way that will help them get used to the process in advance of the introduction of the new Making Tax Digital regime and smooth the transition. With an app, it is possible to provide a unique and high value way to provide clients with advice and help at their fingertips in a way that until now has not been possible. Every time the owner opens his or her smartphone, the firm’s icon is immediately visible and it provides an easy and effective way to reinforce the position as a key business adviser by bringing all the information, calculations and systems into one easily accessible place. An app also proactively promotes the firm and its services to staff, business partners and prospects. An app can help cement relationships by becoming the go-to anchor point in the always-on, mobile world. Whenever the client needs information, the accountant is literally just a tap away – even when the office is closed. Only today, it goes much further than that. The app is not just a symbol of modern thinking; it’s a tool that has a key role to play in reducing the cost of advice and developing new ways to engage consumers. It’s this ease of accessibility that is helping accountants to ‘lock-in’ their clients’ loyalty. Apps have now gone mainstream and purely through mobile at every step of the journey, accountants can leverage data to provide the proactive and personalised service their clients NQ demand. ● Joel Oliver is CEO of
MyFirmsApp, a leader in app and mobile technology. Download a copy of a new guide ‘A Lighthouse in the Digital Fog’ at http://www. myfirmsapp.com NQ Magazine December 2016
15
CORPORATE REPORTING
Systems and skills:
the lowdown
16
NQ Magazine December 2016
CORPORATE REPORTING
Corporate reporting should underpin the development of a more effective system of management, says Neil Stevenson
M
any of you will have had direct experience of the annual cycle of corporate reporting. It is an involved and often complex process. It follows a periodic cycle of planning, data collection, report preparation, double checking, oversight and approval, and publishing. To teams in organisations who are responsible for reporting, it is essential that the process is efficient and timely – especially where mandatory disclosure deadlines loom. As a process, it has become increasingly complex, with multiple requirements, standards, information requests and pressures for more disclosure. It means that reporting is an area frequently under resource pressures. For this reason it is hardly surprising that there are increasing calls for more clarity and simplification, or for reduced burdens. And the International Integrated Reporting Council (IIRC) would agree that reporting must be relevant and seek to be concise. This is core to the International Framework. But reporting should also be seen as part of a system within the organisation to promote and facilitate better thinking across the organisation. And we must not forget that it is a skills-based area of work, providing the opportunity for insight and influence. I suspect we underplay the importance of both of these – systems and skills – especially if we see reporting as primarily a process or a file of disclosures. I suggest that to elevate these two ideas could help us to obtain more value from corporate reporting. What do we mean by a corporate reporting system within the organisation? It should be seen as part of the governance of the organisation, underpinning the development of a more effective system of management, decision making and performance management. Some of the characteristics of an effective system might include the following: • There is a clear alignment to internal management information and senior management discussions. • The organisation has a clear focus on value creation that is articulated consistently throughout the organisation and externally. • Information clearly relates to strategic performance and supports better decision making. Teams are more connected in relation to performance and reporting – the organisation has managed to break down silos. • Engagement with investors is enhanced as a result of a more aligned approach within the organisation. Reporting as a system offers opportunities to enhance organisational performance. We call this integrated thinking. We need to reignite the process by considering how to enhance the system. From this, it follows that reporting requires people with considerable skills. I think that personal skills are not spoken about enough – and yet, heightened skills will NQ Magazine December 2016
make the difference between reporting as compliance and reporting as a value driver. This is the reason why the IIRC has introduced an <IR> Training programme using a ‘competence matrix’ to set out learning outcomes in reporting – which are well aligned to professional accounting qualifications. People involved in reporting already have tremendous skills. I don’t just mean their knowledge of financial reporting standards and accounting treatment. I mean the ability to identify relevant performance indicators and measure performance; management of data collection systems and analysis; presentation of the strategy and business model in a user-centric way; the ability to assess matters for their material relevance and impact; their knowledge of stakeholders’ needs and interests; the ability to translate complex business models and practices into digestible information to help others’ decisions. To make the connection between skills, reporting and a wider organisational system we should go further. First we should make the most of existing strengths and specialisms across the organisation. For example, the finance manager may help to enhance rigour around data capture and the sustainability manager may bring greater experience in wider stakeholder engagement. Then we should ensure that competences are strong around leadership, change management, strategy and governance. If reporting is to add strategic value, then we need to ensure those involved in it are capable of breaking down silos, exerting influence across teams, driving engagement and connections and aligning reporting to value creation as understood and pursued by board and management. To maximise integrity in reporting system, we should dial up the role of the accountant – their ability to exercise professional judgement and the public interest remit that will lead them to take a balanced view of positive and negative factors of value creation. By thinking about system and skills we will be in a position to strengthen the process and relevance of reporting. We can ensure reporting plays a strategic role in the organisation, providing a focal point for clarity and better decision making, and the wider engagement, especially with investors and providers of financial capital. We can help organisations to focus on value creation, developing resilient business models that lead to long-term success. And heighten the value and overall satisfaction of all those – all of NQ you – involved in reporting.
● Neil Stevenson, Managing Director, Global
Implementation, the International Integrated Reporting Council
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BOOK REVIEWS
The write stuff We review four great books that you really should put on your Christmas list
The End of Accounting and the Path Forward for Investors and Managers Baruch Lev and Feng Gu (Wiley, £33.99)
Great Answers To Tough Questions at Work Michael Dodd (Capstone, £12.99)
The premise of this extremely complex and well-researched book is a simple one – that a company’s financial reports are not worth the paper they are written on. The authors – both accountancy academics – argue that the financial metrics used to calculate a company’s financial position are no longer relevant in today’s business environment. They go further, arguing that new ways are needed to measure a company’s performance. Lev and Fu document extensively how financial disclosure has lost its effectiveness, using real-world examples including Shell, Pfizer and Netflix. By way of an example, in the latter’s case, quarterly earnings in April this year fell short of analysts’ estimates. But rather than plummet, Netflix’s share price rose almost 18% on the announcement. The authors argue that investors ignored the backward-looking accounting information, reacting enthusiastically to a sharp rise in the forward-looking new-subscribers indicator: 4.9 million versus the expected four million. They add: “Furthermore, astute investors noticed that a major reason for the earnings shortfall was Netflix’s large investment in future growth – technology development; 9% of sales – which accountants expense in the income statement.” Perhaps it’s time for the regulators to re-assess the old, tried-and-tested methods?
As a former foreign correspondent and political interviewer, Aussie Michael Dodd is used to asking the tough questions. In this book he helps the reader develop the skill of how to answer tough questions and turn difficult situations to your advantage (exactly what it says on the tin). Fundamentally, this is a book about communication, and how to improve your all-round skills. How many times have you stumbled through the answers to a series of searching questions? Or thought of a devastating riposte an hour after you’ve finished the conversation? Well, digest the lessons from this book and those days will be behind you. It is split into two main parts. The first deals with tactics and strategies to tackle tough questions, and includes advice on harnessing the power of stories, adopting the correct tone of voice and how to deal with various personality types. The second half helps readers apply this new-found wisdom to rise to the challenges the workplace brings, from the job interview to contract negotiations. Observing lessons of how not to react while in the spotlight can also be illuminating, says the author. He cites the example of former CEO of BP, Tony Hayward. He made an infamous gaffe after the Gulf of Mexico oil spillage in 2010. During the furore about what the company was doing to tackle the devastation he told one reporter that “I want my life back”. The reputational damage to both him and the oil giant was immense. While your misplaced comments will almost certainly not cause such damage you can do yourself – and your company – many favours by reading this book and digesting the lessons within its pages.
NQ rating
NQ rating
Fascinating – but scary stuff for accountants.
Read this book and 2017 will turn out just fine.
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NQ Magazine December 2016
BOOK REVIEWS
What We Mean When We Talk About Strategy Stuart Crainer and Des Dearlove (Infinite Ideas, £9.99)
Instant memory training for success: Practical techniques for a sharper mind Chester Santos (Capstone, £10.99)
Strategy is something that can often be neglected as business leaders busily fight the operational fires that spring up on a daily basis. Yet, as the authors argue, you neglect strategy at your peril – they describe it as “the intellectual heavy lifting in the business world”. To this end, they have created a compendium of strategies for business in a series of easy-to-digest case studies (‘smorgasbord’, as they put it). Of course one of the problems with ‘strategy’ is – what is it? There are certainly countless definitions, from those expounded by Sun Tzu’s in the Art of War to the Duke of Wellington, to the rather less bellicose Michael Porter. As Crainer and Dearlove concede: “Strategy really is a moveable feast, an awkward hybrid of delivery in the present and mapping out a persuasive future and a route to get there.” Chapter 5 is a key one, tackling ‘first principles’; the authors advise you to ask yourselves some vital questions. These are ‘where are you?’; ‘where do you want to be?’; ‘what do you want to achieve?’; ‘what needs to change?’; ‘what are you good at?’; what is the context?’; and ‘how do you achieve your objectives?’. Ask yourselves these questions, tackling them from a number of different perspectives, and you will be on the road to formulating your strategy. This book uses real-life examples to demonstrate how various strategies have helped businesses to thrive. These include an explanation of how Continental Airlines went from basket case to major success in the 1990s, and how WalMart took the US grocery market by storm. Other chapters focus on the importance of good communication; on how history’s great military strategists have shaped business thinking; on why it’s vital you marry your strategy to the resources you have at your disposal to achieve it; and geopolitics and the strategy of nations (among others). There’s also a chapter dedicated to strategic thinkers and intellectuals – of particular use to young accountants looking to make an impression. Each chapter is short and to the point, typically just four or five pages in length. This makes the lessons of each easy to digest, and means it’s a great book to dip in and out of.
Our only criticism of this book is the bold claim it makes on the back cover, that you’ll “never forget anything again”! Some claim. But it’s a minor quibble, as this book really does work. I know because I did a number of exercises set out in the book and they really did work. Author Chester Santos knows what he is talking about and has the credentials to prove it, as he describes in his introduction. A winner of the USA Memory Championships, he has memorized an entire shuffled pack of cards in two minutes; a computer generated sequence of 100 numbers, reciting the sequence both forwards and backwards; and the name of 200 audience members having heard their names only once. However, Santos emphasises that “there is nothing different or special about my brain… the superpower memory that I’ve developed is the result of training and practice”. So there’s a challenge for you – but what’s the point, other than being able to remember where the car keys are? Santos walks you through the five techniques that can help you start improving your memory. Instead of getting bogged down in theory or chasing fads that don’t work, this book focuses on real-world scenarios where better memory makes a big difference. You can learn how to: • Remember names, faces and phone numbers. • Internalise to-do lists, grocery lists, due dates and more. • Recall conversations, movies, books and directions. • Become the go-to resource in your personal and professional life. Well, having a sharp memory can certainly improve your career prospects. As Santos explains, having an instant recall of detailed facts and figures is sure to impress a client. And being able to remember the details of clients or contacts you have only met once (not only their name but other details about them) is sure to impress not only them but your boss, too.
NQ rating
Buy this book and leave the sticky notes behind.
NQ rating
Highly recommended, this is fascinating stuff. NQ Magazine December 2016
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PSC REGISTER
Significant develop
Laurence Vogel explains what the ‘people with significant control’ register is and why it’s vital your clients understand its importance
A
new register for individuals who exert significant control over UK companies came into effect on 6 April 2016. The register of people with significant control (PSC register) brings about a new requirement for all UK companies (including dormant companies), Societas Europaea (SEs) and limited liability partnerships (LLPs) to keep a register of individuals who own or control their company. The only exception to having to maintain a PSC register is for certain publicly listed companies who report under DTR5. A PSC is anyone in a company or LLP who meets one or more of the conditions listed in the legislation. This is someone who: • Owns, directly or indirectly, more than 25% of the company’s shares. • Holds, directly or indirectly, more than 25% of the company’s voting rights, • Holds the right, directly or indirectly, to appoint or remove the majority of directors. • Has the right to, or actually exercises significant influence or control over the company.
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• Holds the right to exercise or actually exercises significant influence or control over a trust or company that meets one of the first four conditions. A legal entity that satisfies any of the PSC conditions, referred to in the legislation as Registrable Relevant Legal Entities (RLEs), must also be included on the PSC register. There are similar rules for companies owned or controlled by an ‘other registrable person’ who are deemed to be PSCs if they meet the relevant conditions. Companies are already required to keep a ‘PSC register’ (since 6 April 2016). Companies need to make their PSC register available for inspection on request at the company’s registered office or be able to provide copies. The requirement to hold other information such as a register of members and a register of directors has not changed. The PSC information also needs to be filed with Companies House on incorporation and updated when submitting a ‘confirmation statements’ to Companies House. If your company was incorporated before 30 June 2016, the PSC information must be included in your first confirmation statement. Only changes to the PSC register need to be NQ Magazine December 2016
PSC REGISTER
pments
reported on later confirmation statements. The confirmation statement confirms the information that Companies House has on file is up-to-date. The confirmation statement replaced the annual return from 30 June 2016 and must be filed at least annually, even for dormant companies. The confirmation statement must be delivered within 14 days of the end of the review period. This is a reduced time period from the 28 days allowed for the annual return. The statement can be submitted at any time during the review period. It’s a criminal offence to not provide these details. Companies that do not immediately know the identity of a PSC must take reasonable steps to identify them for the PSC register. Failure to provide accurate information on the PSC register and failure to comply with notices requiring someone to provide information are criminal offences, and may result in a fine and or a prison sentence of up to two years. There are similar reporting requirements for LLPs. If you discover you don’t have a PSC, or are still trying to identify one, there are forms that need to be completed to confirm this and the information must also be provided with NQ Magazine December 2016
the confirmation statement. The PSC’s usual residential address won’t be available on the public register, and the day of birth will be suppressed. All other PSC information will be available on the public register, much like directors’ and members’ details are currently held. In some exceptional cases, it may be that a PSC is at risk of violence or intimidation. For example, this might be because they’re linked to a company that might be targeted by activists due to its activities. In these cases, you may apply to have your details protected, so they aren’t available to credit reference agencies. If you’re granted protection, you’ll still need to send your PSC information to Companies House when it’s required (for example by filing a paper copy of your confirmation statement), and the information will still be available to the police. ● Laurence Vogel is head of UK Operations
at Informanagement. Go to http://www. informanagement.co.uk/
NQ 21
ETHICAL DILEMMA
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NQ Magazine December 2016
ETHICAL DILEMMA
Time is tight We outline a case about a company restructure and working with limited resources
Y
ou are a qualified accountant. You have been asked by your line manager to complete a costing exercise with a very short deadline and limited resources. You think that the president of the company is planning to use this information to restructure the company, including making some of your close colleagues redundant. You are worried that your work cannot be robust enough to be used for such a big business decision, but your line manager is putting you under a lot of pressure to complete the work quickly.
Key fundamental principles Objectivity: Could you maintain an unbiased stance
throughout, in view of your close relationship with your colleagues?
Professional competence and due care: Can you realistically produce a costing, with the time and resources available, without compromising the standard of your work?
Confidentiality: Given the sensitivity of the situation, you should maintain discretion and not share your concerns with other staff, who may not be aware of the presidentâ&#x20AC;&#x2122;s intentions.
Considerations Identify relevant facts: The company may be
restructuring, and the president needs to have the most up-to-date and complete financial information to inform any decisions. As a professional accountant, you must ensure that any financial information you provide is robust.
Identify affected parties: Key affected parties are you, your line manager, the president and anyone else who may use the results of the costing exercise. Other stakeholders in the company may also be affected, including those employees who might suffer redundancy. Who should be involved in the resolution: Is there anyone else in the company with whom you can
NQ Magazine December 2016
raise your concerns? Is there a senior finance officer who could advise you, or another member of the board with whom you can discuss your dilemma? Should you approach the president directly?
Possible course of action You think that the president of the company is planning to use the information you produce to restructure the company. As a professional accountant, you have a duty to make your line manager and other users of the information aware of the limitations in the scope of your work. With this in mind, you should attempt to obtain certainty regarding the use of the information. You should arrange a meeting with your line manager and explain that you are unwilling to do the work to the deadline requested, with the resources available, because the work could not be relied upon. You could ask for more time to complete the work to the required standard, or ask for the work to be outsourced. This would have the added benefit of enhanced objectivity. The process of clarifying the intended use of the information and expressing your concerns regarding its reliability is likely to enhance your credibility. You could suggest that your line manager discuss the issue with the president or other members of the board, as appropriate. If your line manager is unsympathetic to your concerns, you should not allow yourself to be associated with information that may be misleading. You should consider the most appropriate way in which to make your concerns known to the board. This may be through the president or the company secretary. If, after exploring all these routes of communication, you still find yourself under unreasonable time pressure, you may have to make clear your refusal to conduct the work, and possibly resign from the company. You should document, in detail, the steps that you take in resolving your dilemma, in case your ethical judgement is challenged in the future. NQ â&#x2014;? Thanks to CCAB for this article
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