NQ magazine September 2019
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THE VOICE OF ALL NQs Contact us
email: graham@pqaccountant.com twitter: @pqmagazine facebook: @pqmags call: 020 7216 6444
YOUR CAREER ‘Water cooler’ chat can really pay dividends
ALL THE NEWS YOU NEED
P16
and a whole lot more Pages 4&6
ACCOUNTANCY CRISIS HOW TO SPOT THE SIGNS OF TERRORIST FINANCING
THE ERODING OF TRUST MEANS IT’S TIME TO RE-INVENT THE ACCOUNTANCY SECTOR P18
ONLINE MARKETING Your website is a great markeing tool that can win you new clients
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INTERVIEW
AccountancyManager is making life easier for the UK’s accountants Page 22
HMRC: FEEL THE FORCE Why it’s important to understand the powers HMRC has at its disposal
P12
Stay a step ahead with Xero Advisor Equivalency Having a sound knowledge of cloud accounting software is invaluable in a competitive job market. Get the Xero Advisor Equivalency Certificate and stand out from the crowd. To get started, speak to one of these education providers or accounting bodies – ACCA, ICAEW, AAT, ICB, IAB, Kaplan, Avado, Premier Training, First Intuition, The Career Academy or Reed.
COMMENT
NQ magazine EDITOR’S COMMENTS
No Planet B! Longer and more turbulent flights, riverside properties flooding and unbearably hot blocks of flats are just some of the risks climate changes poses, according to the UK’s biggest companies. These are the risks outlined in reports submitted to the Carbon Disclosure Project (CDP), a charity that wants to encourage businesses to share how global warming will affect them. No one is immune from this, and to this end our sister publication PQ magazine has joined forces with London South Bank University to offer a fantastic one-day conference in London – called ‘Accountants Will Save The Planet’. Accountants will need to step up to the plate on this issue and be at the forefront of creating our new green world. So why not come along on 21 November and find out how you can do this? Go to page 6 to find out more, or go straight to https://accountants-save-theplanet.eventbrite.co.uk to book your place. In this issue We have a great piece in this month’s issue from Hermes Investment Management’s Leon Kamhi (page 18), looking at the current crisis of trust in accountancy. He gives a great insight in how by working together things can ‘only get better’! We also have Sage’s Chris Downing looking at exactly what impact artificial intelligence will have (page 10). Automation is here to stay and professional upskilling is the order of the day. It’s vital you don’t get left behind. There also a great piece from Chris Surrridge about the importance of your website (page 16). We know a lot of you will be looking to set up in practice or set up your own business. We are returning to another favourite topic of ours, too – money laundering. Do you know suspicious activity when you see it? How do you spot the red flags? Well, we tell you how. Graham Hambly, NQ Editor (graham@pqmagazine.com)
NUMBER CRUNCHING
£882,000
Average ‘profit’ per equity partner at Deloitte, according to latest figures P4
£7.8m
Record fine handed out to forex firm breaching money laundering regs P6
250,000
Total public sector admin jobs that could be lost to AI P10
£112,000 The average global salary of accountants who offer business insight P14
33%
The target for the number of women on boards by 2020 P14
NEWS
IN BRIEF Paying salaries in bitcoin New Zealand has become the first country to legally back firms that are paying their employees in cryptocurrencies. The ruling by New Zealand’s tax authority means from 1 September wages can be paid with the likes of bitcoin, as long as the payments are in regular fixed amounts. The tax authority has also insisted that the digital currency must be pegged to at least one regular currency and be able to be converted directly into a standard form of payment. Excluded from the ruling are selfemployed taxpayers.
British tech success UK tech start-ups are enjoying an unprecedented investment boom, attracting £5.5bn of foreign funding in the first seven months of the year. They are now on course to secure just under £10bn by the end of the year, and the data shows that Britain remains the most attractive country in Europe for overseas tech investors. It has been suggested that tech business are regarded as being less exposed to a no-deal Brexit than companies from other industries, which rely on complex supply chains.
Accounting policy disclosure improvements The International Accounting Standards Board has issued proposed amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements to help companies provide useful accounting policy disclosures to users of financial statements. IAS 1 requires companies to disclose their ‘significant’ accounting policies. The Board is proposing to replace the reference to ‘significant’ with a requirement to disclose ‘material’ accounting policies to clarify the threshold for disclosing information.
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Salary hikes all round! The Deloitte results are out, and it shows UK partners are in line for their biggest payday in a decade, despite all the pressures on the Big 4 firms. The average ‘profit’ per equity partner has risen to £882,000, up £50,000 year-on-year. Revenue to May grew by 10.9% to £3.97bn, with over 4,000 people joining the firm, including 1,200 graduates and apprentices. Female partner promotions were up nearly threefold to 32, or 41% of promotions. Investment outside London also continued, including the new Tech Foundry in Reading, with plans to create 350 new jobs. Distributable profit was £617m, up from £584m in the prior year. The figure benefited from a one-off gain on the sale of an investment, lower provisioning charges and currency gains. Deloitte admits that without these profits would have been flat. The firm’s total tax contribution was £1,057m in 2019. This comprised £638m of taxes collected on behalf of HMRC (VAT, PAYE & NICs) and £419m of taxes borne by the firm (partner income taxes, NICs, corporation tax and employer’s national insurance).
Client cull on the cards The UK’s Big Six accountancy firms are preparing to offload their more risky and unprofitable audit clients, according to a Financial Times report. Sweeping reviews of clients have been launched with the aim of weeding out those considered to be ‘problematic’. The auditors are particularly concerned that they will become embroiled in any fallout in volatile sectors such as retail and outsourcing. The FT said that PwC started its audit book review in June, with Hemione Hudson saying it would “ensure we achieve a return that allows continual investment in and focus on quality”. She explained the process could lead to an increase in fees and stressed there would be some instances where PwC will walk away from clients. EY has written to its large listed clients, warning them on increased fees, due to unprecedented market forces.
New blacklist proposed Brussels has said it plans to create a new blacklist of non-EU countries that are open to fraud and money laundering. Commissioner for Justice Vera Jourova has confirmed she is undertaking a new attempt to compile a list of biggest offenders by the autumn. This, in turn, will mean accountants will be expected to adhere to enhanced due diligence when conducting business with those on the list. In February, a list of allegedly dodgy jurisdictions was produced naming four US overseas territories and Saudia Arabia. This was quickly killed off after the EU was warned of “severe negative consequences”. The idea behind the blacklist was to force European banks to perform enhanced checks on anti-money laundering by individuals, and allow them to follow the cash coming in from territories on the list. One of the big criticisms of the list was it didn’t include EU member states and their territories! Laure Brillaud, of Transparency International, said: “We have seen with recent scandals that the EU is a very attractive place for money laundering and dirty money. She pointed out “the EU should make sure to clean up its own backyard, and make sure it doesn’t welcome dirty money via its financial system and real estate sector”. Jourova has said the new list will have new methodology to identify the overseas jurisdictions, which are failing to clamp down on money laundering risks and terrorist financing. NQ Magazine September 2019
BIG 4 NEWS
Understanding annual reports A new app that allows investors and regulators to cut through the complicated language of company annual reports has been developed by Lancaster University. The new tool dissects and analyses the narrative aspects of companies’ annual reports, and documents aimed at shareholders. The Corporate Financial Information Environment – Final Report Structure Extractor (CFIE –FRSE) app, to give it its full title, aims to help users identify unusual patterns in corporate reports that may help distinguish long-term financial strength from inflated short-term profit. Professor Steve Young, head of accounting in Lancaster University Management School, said: “Annual reports are highly unstructured, and different companies report in different ways, which makes extracting content and comparing reports very difficult. Almost every document is different.”
Saving the planet
The app has analysed more than 26,000 documents published between 2003 and 2017 and scored on features such as length, readability and sentiment. It found that the average length of annual reports has more than doubled over the last decade to almost 34,000 words. Average report readability – measured using an algorithm that penalises long sentences and complex words – is also poor, and there have been no noticeable improvements over the sample period. There has, explained Young, already been interest in CFIE-FRSE from investment and hedge-fund managers. The UK app economy is estimated to be worth about £83bn by 2021, but with almost 1,000 apps submitted to the app store each day competition is high.
Time for more ethical auditors? Enhancing the ethics partner’s authority and providing a simple list of permitted services are just two important changes being proposed to the UK’s ethical and auditing standards by the Financial Reporting Council (FRC). The UK’s accountancy watchdog explained it is pushing for more stringent ethical rules for auditors, in direct response to the findings of
recent inspections and enforcement cases. The FRC is also proposing to enhance the quality and content of auditor’s reports in order to improve transparency about what is found in the course of an audit. The FRC said it recognises that there are a number of concurrent reviews of the UK audit market taking place (Sir Donald Brydon’s being the main one) and that these proposals are not intended to pre-empt any outcomes.
Following the success of our previous accounting conferences London South Bank University and PQ magazine are hosting a one-day conference looking to see if we are accounting for extinction. We have gone all green with our ‘Accountants will save the planet!’ theme, as like many we believe there is no Planet B. Accountants have a key role to play in creating a sustainable future and we believe you are part of the solution not part of the problem. Whether that means calling for a carbon emergency, or just understanding its important to save both the accountants and the bees. There will also be sessions on carbon taxes, the morality of paying taxes, and why it may be time to get tough with accountants on money laundering. We will end the day with our now infamous panel discussion. This is a unique opportunity to become involved in the debate and help shape the future. We have speakers from The Prince’s Trust Accounting 4 Sustainability, Carbon Trust, and ICAEW, to name a few. This year there is a small charge to cover the food (you eat a lot!), but we promise you a day to remember, so put 21 November in your diary. To sign up go to https://accountantssave-the-planet.eventbrite.co.uk
IN BRIEF Most Wanted! The National Crime Agency recently released its list of 11 ‘most wanted’ fugitives, in an effort to catch some very nasty criminals. Included on the list is Sarah Panitzke, from Fulford, near York. Pantizke is wanted by HMRC and is accused of laundering around £1bn for a crime group involved in VAT fraud. To carry out the alleged frauds, she travelled extensively to places including Dubai, Spain and Andorra. She absconded in May 2013 before her trial finished. Panitzke has a Yorkshire accent and is about 5ft 5in tall. Some 18 members of her crime group have already received sentences totalling 135 years. 6
Uber losses top $5bn Taxi-haling giant Uber has posted a whopping $5.24bn loss for the three months to the end of June. This is on revenues of $3.16bn. The loss is also a significant jump on the $1bn lost in the first quarter results, issued after its stock market debut in May. The results show that around $4bn of the losses stem from stock-based compensation tied to the company’s initial public offering. There is a genuine worry, however, that Uber may never be profitable. CEO Dara Khosrowshahi explained that 2019 will be Uber’s peak investment year. He thinks in 2020 and 20121 losses will fall and that ‘eventually’ the business will be breakeven and even a profitable business!
NQ Magazine September 2019
ADVERTISING FEATURE
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hether you’re a newly qualified accountant or the finish line is almost in sight, one thing is certain: achieving a professional accounting qualification is to be celebrated. However, getting to the top in a crowded labour market is tough. The latest statistics from the Financial Reporting Council suggest that the accountancy sector is becoming an ever more competitive field, with a 2.4% increase in the number of accounting students worldwide from 2016 to 2017 alone. Achieving a masters degree, such as Manchester Metropolitan University’s Global Online MSc Finance and Strategy, could prove your dedication and commitment to potential employers and give your CV the boost that it needs. Not only will it complement your existing work experience and your accounting knowledge, it has also been designed to give you the advanced strategic skills you need to manage the complexities of an ever-evolving global financial landscape. And the good news is, if you already have a professional accountancy qualification, you could be
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Enquiries & Powers
SPECIALIST NEWSLETTER (6 ISSUES PER YEAR)
The go-to publication if your clients have an investigation or enquiry hmrctaxinvestigation.co.uk For more information go to https://hmrctaxinvestigationco.uk/
TERRORIST FINANCING
Spotting the danger signs
You have a duty under the law to report suspicious financial activity, so how do you spot the red flags?
M
r X, a customer of LoganBank, receives large cash deposits into his account. He says they are his wages from an employer in Iran. Some of the money is used by Mr X to rent property in his country of residence. These transactions arouse sufficient concern for a LoganBank official to submit a suspicious activity report (SAR). Mr X also owns a Syrian company and this also receives substantial transfers from Iran. Further enquiries reveal that the manager of this company has already been convicted of terrorism and that the company itself is caught up in an ongoing anti-terrorism investigation. The cash deposits in Mr X’s personal account do indeed prove to be linked to the financing of terror.
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WHY CAN TERRORIST FINANCING BE CONSIDERABLY MORE DIFFICULT TO SPOT THAN MONEY LAUNDERING? The main difficulty is that the money itself might be ‘clean’ right up to the moment it is used to finance a terrorist attack. There may be no typical trail of dirty or suspicious money to follow. This case is a good example of how by exercising due diligence a professional can avoid unwittingly enabling crime and instead help in the investigation and apprehension of the criminal.
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WHERE ARE THE RED FLAGS?
Again, we see the importance of adequate risk assessment as the first step in undertaking client due diligence. It is unlikely that simply obtaining documentary evidence of Mr X’s identity would have brought the fundamental issue to light. A better, more secure approach would have been to make enquiries about the individual’s business and the source of his income, both of which actions are an integral part of all good AML risk assessment.
THE FINANCIAL ACTION TASK FORCE (FATF) PUBLISHES THIS HELPFUL LIST OF THE MAIN RED FLAGS ASSOCIATED WITH TERRORIST FINANCING: ● Unusual business activity. ● Inability to identify funding sources. ● Wire transfers made soon after cash deposits. ● International transfers of money from and/or to locations of specific concern (it helps to keep an eye on the list of high-risk jurisdictions maintained by HM Treasury and the Office of Financial Sanctions Implementation). ● Commercial or account behaviour that is atypical. ● Transactions with links to charities or relief organisations. ● Big cash transactions, particularly in areas with frequent terrorist and criminal activity. ● Media coverage of the account holder’s activities. ● Large sums transferred between the accounts of people or newly-established companies with no apparent business relationship. Frequent cash deposits or withdrawals from charity accounts involving people with no apparent relationship. ● Unexplained transfers into the accounts of individuals and companies from foreign jurisdictions with a reputation for terrorist activity. ● Either the identity of an account holder or the destination of the transfer is supported by little, incomplete or unverifiable information. ● Frequent international transfers into and out of the accounts of companies created by the nationals of terror-prone countries.
NQ
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NQ Magazine September 2019
ARTIFICIAL INTELLIGENCE
Working with the robots: the future of accountancy The workplace is changing and accountants must change with it in order to prosper, says Chris Downing
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e’re all used to the debate about the impact of AI on jobs – it’s become almost as common in the public sphere as conjecture about the arrival of AI in the first place. For accountants, the issue is definitely a relevant one. As finance increasingly goes digital, accountants need to be able to work with automation and AI if they’re to remain competitive. Reform, a think tank that provides insight on the state of public sector in the UK, put out a report in 2017 which stated that close to 250,000 admin-related jobs in the public sector could conceivably be performed by a robot in the next two decades. These worries about the impact of technology on jobs are far from new. But they’re no longer fanciful – with ever more employment sectors finding automation to be a present reality, is it time for traditional industries like accounting, which have been largely unchanged for centuries, to worry about significant job losses?
DANGER OR OPPORTUNITY? It’s a question to which Carl Reader, director of d&t Chartered Accountants and author of The Startup Coach, has given considerable thought. It’s his conclusion that those employed in the private sector, which includes accountants, have only ‘scratched the surface’ of what technology could do for their businesses. As a result, he predicts that a growing number of jobs will feel the impact of AI in the coming years. 10
“It staggers me that the report only believes it’s 250,000 public sector jobs – I believe it will be so much more. Many jobs that accountants will be doing in the next 20 years or so won’t have even been invented yet. “If you look at accountancy 20 years ago, the vast amount of work involved paper records. With automated bank feeds and many processes going online, that’s pretty much become a thing of the past,” concluded Reader. He added that any reduction in jobs will be offset by the arrival of new roles for accountants, however, with advice and consultancy becoming increasingly central to the business model. Paul Donno, managing director of 1 Accounts Online, has come to a similar conclusion, and believes the impact of technology on accountancy is already very evident. “If you look at where our profession is now, it’s miles away from where it was two or three years ago. I think that the bookkeeping industry has already been hit very hard by things like the automation of account transactions – so already technology is making a big impact,” said Donno. Even though some accountants have already seen their jobs changing as the result of automation, Donno explains that the long-term effects will be undoubtedly positive. “We’ve trained to be advisors and our real work is helping a business grow. I’ve certainly seen first-hand that automation is already allowing us to spend more time with clients.” NQ Magazine September 2019
ARTIFICIAL INTELLIGENCE
AUTOMATION IS HERE TO STAY
TRAINING, NOT REPLACEMENT
The age of automation and AI has arrived. We’re no longer in the pre-launch hype stage – although the basic technology has been theoretically possible for years, we’re now seeing consumers adopting it, which is a new stage. We’re happy to let an automated system plan our days, for example, and as a result we’re also happier than we were to have core business processes like accounting handled by a robot. And it’s exactly because of that adoption that the concerns about AI’s impact on jobs will pass with time. Our history as a civilisation is littered with similar incidents of development and change – it’s what progress looks like, and it’s never as bad as we fear. The arrival of AI is no different to when PCs first became commonplace and we all fretted that we’d be replaced – there was a similar public debate at that point as well. The reality ended up being quite the reverse – the entire economy now runs on personal computing, with humans still very much in the driving seat. This fear always appears when new technology arrives – right back to the invention of the textile mill and the original Luddites. But with every new example of technology-based disruption come new opportunities as well. There will be a re-jig and we will have to upskill ourselves to live and work with AI – but that doesn’t mean we’re about to become redundant as a species.
In other words, professional upskilling is much more commonplace than you might think – and it’s been on the government’s agenda for years as well. Even as far back as 2016, when she was Home Secretary, Theresa May discussed plans to involve those with financial technology skills in law enforcement operations, proving that the blurring of lines in these jobs is merely a change – not a reduction in opportunity. It’s a move which Reader has praised. “I think that the repurposing will happen. If you look at other professions, such as marketing, journalism and so on, they’ve had to redefine how they work because of technology, so this was always going to eventually affect the accountancy profession. It’s a fact of life. “Online security is already so important and moving forward, we have to make sure our data is locked in and secure, so accountants and finance professionals could play a big role in that.” So to conclude, there’s no doubt that AI will change the way we work – there’s not been a technological innovation yet that didn’t. The real question, though, is how quick the accountancy profession will be to pick up on that – and NQ upskill in response.
NQ Magazine September 2019
● Chris Downing is Director of Product
Management at Sage
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HMRC’S POWERS
What’s
HMRC
up to now? Mark McLaughlin points out that it is important to understand HMRC’s powers and their potential implications
I
t is important for taxpayers and advisers to understand the possible ramifications when HMRC exercises its powers, so that they can respond in the most appropriate manner. For example, HMRC may make a ‘discovery’ assessment after the normal ‘window’ for commencing an enquiry into an individual’s self-assessment return has closed, if certain conditions are satisfied (TMA 1970, s 29; similar rules apply to companies). HMRC commonly uses its discovery powers if (for example) the taxpayer has undeclared income or gains, or if HMRC considers that the taxpayer’s self-assessment return understates their liability. In broad terms, HMRC may assess tax in relation to closed years within extended time limits if it discovers that the tax undeclared or under-assessed is attributable either to: ● careless or deliberate conduct of the taxpayer (or a person acting on his behalf); or ● something of which the HMRC officer could not have been reasonably expected to be aware at the time the enquiry window closed (or an enquiry closure notice was given) based on the information made available to him before that time. A discovery assessment often involves a degree of guesswork by HMRC, and the income assessed may therefore be excessive. There is a general right of appeal against a discovery assessment, within 30 days after the date on which the assessment was issued (TMA 1970, s 31). 12
DISCOVERY – OR A DETERMINATION? Some taxpayers receive a notice to file a tax return from HMRC but do nothing, even where tax is due. Without a completed tax return, HMRC will not know the amount of tax payable, but still need to make some form of estimate of the tax liability. In such circumstances, HMRC may consider making a determination of the tax liability, within three years beginning with the ‘filing date’ (i.e. normally 31 January following the end of the relevant tax year). The determination is treated as a self-assessment, but only until the taxpayer files an actual tax return within the time limits for superseding the determination. NQ Magazine September 2019
HMRC’S POWERS IMPORTANT DISTINCTION To some taxpayers, a discovery assessment and a determination might seem similar. However, it is important to distinguish them. For example, in Huntley v Revenue and Customs [2018] UKFTT 0760 (TC), the taxpayer, a shop proprietor since 1996/97 or before, received notices to file (in the form of blank tax returns) for most years. However, the taxpayer generally did not send completed tax returns to HMRC or pay any tax. HMRC subsequently issued discovery assessments in September 2013 for the tax years 1996/97 to 2011/12. The taxpayer appealed. A statutory review upheld the assessments. The taxpayer took no further action. In July 2016, the taxpayer submitted four tax returns for the tax years 2008/09 to 2011/12. However, HMRC did not accept them (he also submitted a tax return for 2012/13, which HMRC accepted as it was not one of the tax years assessed). In November 2016, the appellant lodged 12 tax returns with HMRC for the tax years 1996/97 to 2007/08. HMRC did not accept those returns. Thus, in effect the taxpayer filed 16 tax returns for all the years for which HMRC had raised discovery assessments. The taxpayer applied to the First-tier Tribunal to be allowed to make a late appeal against HMRC’s refusal to accept or process his tax returns. However, the tribunal held that it had no jurisdiction over HMRC’s refusal to accept and/ or process the 16 tax returns, and therefore the proceedings must be struck out. While the tribunal had no jurisdiction over the matter, its view was that the taxpayer’s tax returns could not displace the discovery assessments. The taxpayer was apparently confused between determinations (which cannot be appealed against but can be displaced by filing returns within the statutory time limit) and discovery assessments. The tribunal pointed out that there is no statutory provision allowing a discovery assessment to be displaced by a tax return. The discovery assessments were valid and now beyond challenge as an appeal against them had been unsuccessful.
COSTLY MISTAKE
Importantly, there is no right of appeal against a determination, because the taxpayer’s return automatically replaces the determination without the need for an appeal. The tax charged by the determination is payable until replaced by the self-assessment return, at which point any tax overpaid can be repaid. The due date for payment of the tax charged by the determination is the due date that would have applied if the self- assessment return had been filed on time. However, the determination can only be replaced by an actual self-assessment return made within the above threeyear timeframe, or if later within 12 months of the date of the determination (TMA 1970, s 28C). NQ Magazine September 2019
The distinction between a discovery assessment and determination was important to the taxpayer in Huntley as his returns showed significantly less tax owing than HMRC had assessed. His exposure to additional tax liabilities might have been prevented, had he taken his appeal against the discovery assessments to the tribunal within the statutory time limit. It is perhaps surprising that HMRC issued discovery assessments as opposed to determinations. However, the tribunal perhaps hit the nail on the head when speculating that it may well have been because for most tax years they would have been too late to issue determinations. NQ ● Mark McLaughlin CTA (Fellow) ATT (Fellow)
TEP is a tax consultant with the TACS Partnership (www.tacs.co.uk), consultant editor and author (www. markmclaughlin.co.uk) and co-founder of TaxationWeb (www.taxationweb. co.uk). This article first appeared in HMRC Enquiries, Investigations and Powers magazine (see https://hmrctaxinvestigation.co.uk) 13
YOUR CAREER
Water cooler
chat that pays off Sean Purcell explains that by improving your soft skills you can earn an average 72% more than your colleagues
A
s you will know if you read this magazine regularly, the world of finance going forward is going to be severely affected by changes in technology. This will provide finance staff with both threats and opportunities. One interesting statistic to share with you from a recent global PWC survey of 14
effective finance teams is that they found that the global median salary of an accountant engaged in transactional type roles (budgeting, month end, etc) was £65,000, while those working in roles offering business insight had a median upper quartile average salary of £112,000 (yes £112k!) That’s 72% more and this differential gap is only
going to get wider. So, as a newly qualified accountant entering the workplace, how do you earn up to 72% more salary than your colleagues? Well, as stated in the PWC survey, it will be members of the finance team who are able to give insight which will be the most valuable and therefore the highest earners. NQ Magazine September 2019
YOUR CAREER How can I gain insight? Often the ability to gain insight comes from your ability to gain empathy and trust with your business stakeholders. Other research shows that accountants are often seen by other people in business as lacking humility and often coming across as pompous and arrogant. This is likely to make other business colleagues reluctant to open up to their finance colleagues for fear of looking stupid. As a result, they will not share things with their finance counterparts, such as perspectives on what they seen as going wrong within the business and thus not provide an opportunity for finance to gain better insight. A tip to help you gain more trust from colleagues is to try and find out something personal about your business colleagues (what are their hobbies? what team do they support? where do their kids go to school?). To a traditional transactional finance functional member, this might seem totally irrelevant and nothing to do with finance. However, as a result of your research you will be able to sway your conversation around to the fact that you love Labradors, knowing that the logistics director to whom you are working with breeds them as a hobby! As a result, you will likely reframe the perception the logistics person has of you. They will see you as more human and open up to you more. Having changed how you are perceived they may now start to share information about other logistical issues which they feel could cause commercial problems going forward (conversations from which you could add real value to the business going forward). It may seem obvious, but it is behavioural trait rarely practised in the world of the finance function but is something which has been used in the sales function for years. Try it, change how others perceive your role and watch your salary and influence NQ grow.
Women not just ‘tick box’ Although the percentage of women on FTSE 100 boards is on track to reach 33% by 2020, a new report has found worrying trends implying that companies are appointing women for symbolic value. The Female FTSE Board Report, produced annually by Cranfield University’s School of Management, reveals that women serve shorter tenures than men (on average, female non-executive directors serve 3.8 years – with men serving five years) and are less likely to get promoted into senior roles. Professor Sue Vinnicombe, lead author of the report, said: “Since we started our report more than two decades ago, we have seen the number of women on boards increase from 6.7% to 32%. There has clearly
been great progress on the numbers front but scratch beneath the surface and we suggest that some companies have simply been ticking a box. “There is mounting evidence that women have shorter tenures and are less likely to be promoted into senior roles than their male counterparts. The number of women in chair roles has decreased this year. We need urgent action to make sure that women are being appointed to boards on and recognised for their contribution, and not simply for symbolic value.” The research is supported by the Financial Reporting Council, and CEO Stephen Haddrill said: “Diversity at board level, and at all levels of the workforce, adds real value to business culture and the bottom line.”
The Female FTSE Board Report 2019
Moving Beyond the Numbers
● Sean Purcell runs programmes
on how finance can change and develop more insight and influence for both the ACCA,CGMA and AICPA and consultancy business Wise Up Now. If you have any tip on how you gain insight, he would love to hear from you at info@ wiseupnow.co.uk NQ Magazine September 2019
Professor Susan Vinnicombe, CBE Cranfield University, Cranfield School of Management Dr Doyin Atewologun Cranfield University, Cranfield School of Management Dr Valentina Battista Cranfield University, Cranfield School of Management
Supporting sponsor
www.xxx
The Female FTSE Board Report 2019
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ONLINE MARKETING
Ten top website tips
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NQ Magazine September 2019
ONLINE MARKETING
Your firm’s website needs to be expertly created in order to grow your online presence and increase your clients. Chris Surridge explains why
G
reat websites aren’t just about fancy design – although it can sometimes be a struggle to convince a web designer of that fact. A website does need to be eye catchy and easy to use but it also needs to incorporate a number of important factors. These factors seek to maximise conversion, but also satisfy search engine ranking criteria, giving you a much better chance of being listed high up in the SERPs (search engine results pages). If you’re having your website designed, here’s a helpful check-list of things to include:
Compelling content Content is king! We have had this drummed into us over the past decade, but what does it mean? It means you need to create quality content that engages the user and compels them to want to use you. Who are you? What is your niche or USP? What do you do that other accountancy firms don’t do? Why do people need your services? Splitting content out onto different pages is key to maximising the number of people landing on your site for different search terms.
Responsive design A responsive website essentially responds to whatever device you are using to look at your website, by displaying the appropriate version for best readability. If a user is viewing your site on a mobile, then they will be shown the mobile-version. If they are on a laptop then they will be shown the desktop version that’s friendly for that sized device. When you build your accountancy firm’s website, make sure responsive design is incorporated, to create mobile-friendly and desktop-friendly versions. It reduces bounce – when a user lands and then exits again.
Trust signals You have just a few seconds to make a first impression when someone lands on your site, so you need to ensure your brand’s proposition stands out. A very effective way of doing this is to include obvious markers that instil trust in your brand. This could be a testimonial or a snippet saying ‘as featured in’ if you’ve had some good press. It could be a set of logos for well-known brands you have worked with or it could be accreditations and certifications you’ve achieved. The more trust markers you can include the better as it subconsciously captivates the user very early on. NQ Magazine September 2019
Strong CTAs You’ve successfully got people to land on your site and caught their attention, now what? You need to encourage them to take an action. This might be to get in touch, it might be to download some information or it might be to engage with something interactive. Whatever it is, make the task easy. Include obvious CTAs (calls to action) that are simple but effective. Test them to make sure they work.
Rotating banner Also known as a front-page carousel or image slider, this is a series of images that rotate on the homepage of website. These are really eye-catchy and provide a visually fun way to display important content that lies on your website, whether it be the services you offer, the clients you work with or other important things you want to promote.
Social feeds If you’re using social media for your brand, and to be honest you really should be, ensure you link everything up. Linking up your online activity makes you a stronger, more prominent digital force and allows people to navigate between your website and social presence. Include social icons on your pages, with links to your social media profiles. Pulling through live snippets of your social activity onto your homepage also shows both search engines and clients or potential clients that you are current and active.
Analytics This goes without saying, but if you want to know how well you’re performing in the online world, you need to set up some tracking with Google Analytics. This will involve adding a tracking code so you can see how each page is doing. It’s also recommended that you set up Google Search Console as this will flag any technical errors on your site, picked up by Google and will give you NQ instructions on how to fix them. ● Chris Surridge is Marketing Director
at Whitefish Marketing, a digital web agency specialising in building and marketing accountancy websites. For further information call 01303 720 288 or head to www.whitefishmarketing.co.uk
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OPINION
Time to reinvent the accountancy profession There is usually a silver lining to every dark cloud, and the one hanging over the UK accounting sector is no exception, says Leon Kamhi
O
ver the past 20 years we have worked our way into a crisis of trust in accounts. We have lost faith not only in the institutions that are meant to oversee the process of validating company performance, but in the process itself. It has become common practice to try to pass the blame for what has happened to the sector, but the truth is that we are all partly responsible. Investors, regulators, politicians and bankers all share some fault with companies and accountants in bringing us to where we are today. That is why we are all now responsible for fixing this sector. What is key to moving on from the blame game is accepting that there are many aspects to the sector’s reinvention, and that we all need to change our ways. The good news is that if we all step up to the plate it will be a real moment of opportunity for profoundly positive change.
The reinvention of the accounting sector must be based on one key objective: accounts should reflect the real performance of the business. This is what most people outside financial services think they should do, and they are mystified as to why this is not the case. For those of us on the inside, we know that accounts do not always 18
demonstrate a true and fair view of a company because they are often prepared to ensure that they maintain a technical adherence to accounting standards rather than ensuring that they reflect the underlying business performance. As a consequence, when investors read audited accounts, we are often left wondering whether the profits being reported are ‘realised’ or ‘unrealised’, and if ‘unrealised’, will they ever be ‘realised’? Does ‘cash’ always mean ‘cash’, and just how is ‘goodwill’ written down? Why are some new CEOs able to ‘kitchen sink’ by writing off as much as they can when they take up the position? And why do boards, who signed off previous accounts, let them? Could these writeoffs have been made before – and, if so, why wasn’t it done previously? There are issues concerning the way revenues are recognised and the same is true for lease payments. There is also an extensive suite of obscure instruments that purport to inform, but in fact serve only to obscure and confuse. As investors, we are not alone in demanding change – it will help everyone in the chain, from companies to investors, to function more clearly, cleanly and effectively. If accounting is to fulfil its potential of being a truly useful
activity in supporting sustainable wealth creation by companies, the industry needs to confront how accounts can be put together, audited and regulated in a way that clearly and honestly reflects the performance of the business. Without a firm answer to this, the hope for a reinvention of the accounting sector will never become a reality. Therefore, we must examine the different actors and what they need to do to effect positive change.
Clearly, companies that are being audited have the greatest responsibility. They have the information that can and should be made available to comply with the rules and most of the time they will provide it. However, in the rules is where we find our first opportunity for reinvention. In reality, it is very easy to stay inside the relatively wide lines of many accounting standards, and company audit committees generally do a good job within these rules. They make every effort to ensure that regarding their accounts, the CFO, the finance department and the auditors comply with the exact letter of the law. Most audit committees have a good range of people – from those with hard accounting skills to those who are there to ask the ‘stupid’ questions. For companies, the question around reinvention NQ Magazine September 2019
OPINION
NQ Magazine September 2019
19
OPINION Sir John Kingman, who led the FRC's review
is this: to what extent is the audit committee willing to act independently from the management? Moreover, how determined are they to show not only what they are required to from a regulatory perspective, but what they should in order to help investors and other users understand the true performance and position of the company?
Auditors have the greatest opportunity to address current accounting issues. Firstly, they have unbeatable knowledge about how companies across every spectrum operate as they interact with so many of them. 20
Secondly, they are able to remunerate staff relatively well, so can attract talented people. However, there are justifiable concerns around auditors’ incentives and their perception that the regulator sees technical compliance as the primary objective, and a true and fair view of the underlying business performance as a secondary issue for accounts. Unfortunately, the pressure to achieve ‘profit per partner’ has led the auditors to create overly leveraged teams with senior members often not spending enough time with a client. It is also understandable that there is immense focus on the technical side, and one can make a case for the benefit of bringing in a team who are laser-sharp on procedures. However, it
should not come at the expense of having an individual with specialist sector experience who truly understands the business. There are teams that are competent and capable in the technical skill of auditing, but without visiting a company – or a range of them – and actively engaging with them, how can they really understand the business? Furthermore, if you do not understand the business or sector, it is impossible to carry out an effective assessment and audit of a firm. It would be as if you put a fund manager in charge of running an Asia strategy without taking them to Asia. There is a further issue with auditing firms that needs addressing from a corporate level, if NQ Magazine September 2019
OPINION they are to reinvent themselves. As a partnership, there is no legal requirement to have an independent chair or majority independent board. However, because of the privilege of limited liability enjoyed by companies and their shareholders, the wider impact of company failure and potential job losses can ripple out to the local economy and society. Consequently, auditors are in effect providing a public service, and this demands stronger governance. Audit firms need to develop far greater transparency around their activities and be able to explain how remuneration is not only driven by the profit-per-partner, but also by the quality of the audits they deliver.
During the FRC review, led by Sir John Kingman, it became clear that the regulator has struggled from having a relatively limited talent pool from which to draw its staff. It is also our perception that the regulator had been over-focused on procedure rather than on understanding whether the accounts that audit firms were auditing really reflected a business and its underlying performance. There was an inherent fear that any review of an audit or account that had been flagged as suspect would take such a long time to unravel, that the FRC instead focused on whether something would stand up in court, rather than if the industry’s general practice could be improved by examining, updating or clarifying an issue. The Kingman Review recommended the creation of a new regulator to replace the FRC – the Accounting Reporting and Governance Authority. This presents a strong case and opportunity for the reinvention of the regulator to build something that is fit for purpose. Instead, the new regulator must demand of companies and auditors that they make their highest priority and purpose to be that accounts are prepared on the basis of a prudent approach at the same time as representing a true and fair view of the company’s performance and position. With the introduction of a new regulator we should hope and expect that these NQ Magazine September 2019
issues will all be addressed as a matter of urgency.
performance is being reflected in the accounts and why certain accounting treatments are being used. To do this, through informed discussion, we need to have the right skills and resources available. Our investment teams may already contain people who fulfil this need, but if not investors need to consider how to resource the function to carry it out effectively. Rather than lay the blame solely elsewhere, if we as investors fulfilled our stewardship responsibilities, audit committee chairs would start listening and put more pressure on their audit firms, too.
It is imperative that investors put as much emphasis on acting as stewards of capital as they do as stock-pickers. Alongside the auditors, we have a responsibility to society as well as to our clients and beneficiaries. We are taking on the duty of a steward of other people’s capital and ownership of a company that provides a livelihood to many and goods or services to many more. Unfortunately, across the industry much of fund manager activity is not focused on engagement or on turning poor companies into better ones. Nonetheless, as a group, we need to We have already seen how treat the time between the purchase improvements in this area help and disposal of a company stock or investors make better decisions. bond as equally important as the buy Viability statements, which were or sell decision. introduced three years ago, provide a Stewardship is a growing area, but clear view of whether a company is in across the investment management good health or not. According to many industry it is currently woefully of the audit chairs we speak to, viability under-resourced, in terms of both statements generate a board discussion the seniority and the knowledge and that leads to better business decisions. experience of those who carry the Accounting rules are not going to responsibility – but that is changing. change in a hurry – but we do not need To date, a disproportionate level them to do so in order to make the of investors’ stewardship efforts improvements we seek. have been focused on executive Instead, when a certain standard remuneration. Only now is the does not reflect underlying business industry increasing its attention performance, an auditor and a and resource available to address company should feel empowered to hugely important environment explain why they are not following and social issues. the standard and provide additional The sad reality is that in 2019 information that delivers a true and there is very limited stewardship fair. Company accountants, audit that focuses on the quality and committees, auditors and investors – relevance of a company’s accounts we all have our role to play and need nor the membership and activity of to work together much more closely to the audit committee, all of which are improve, including the regulator. fundamental to the running of the We have an opportunity – and business. Yes, we will spot when an necessity – for reinvention, but more audit firm has been there too long, importantly, we have a responsibility to NQ or if non-audit fees get too get it right. high. Equally, when there is a crisis, a fraud or a particularly egregious accounting issue, ● Leon Kamhi, Head of investors get busy. There is, Responsibility at Hermes 1 however, plenty more we can Investment Management do before this happens, which The views and opinions contained herein are may mean we even avoid getting to that those of the author and may not necessarily stage. represent views expressed or reflected in As investors, we must be more other Hermes communications, strategies or systematically engaged with the audit products committee chair and the CFO. It is vital that we examine how business
L
21
INTERVIEW
Keeping life
simple
Meet James Byrne, CEO and Co-Founder of AccountancyManager
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NQ Magazine September 2019
INTERVIEW
W
orking as an accountant, James Byrne had an idea. That idea now helps accountancy firms across the country to save masses of time on admin and has been voted the number-onepractice management software in the UK. James and his co-founder – Alex Hawke – now head up the team from their offices in historic Warwick. It’s been just two years since AccountancyManager launched and they’ve taken the practice management world by storm. Growing from two to 20 staff and currently serving thousands of accountants and bookkeepers, AccountancyManager is a true start-up success story. We spoke to James Byrne – recently short-listed for Natwest’s Young Entrepreneur of the Year Award – about how it all began.
Q: So James, how does an accountant become the cofounder of a software start-up? A: Frustration. Pure and simple. I was shocked at how much time my firm spent on what can only be described as admin. Chasing clients for information and reminding them to make payments was a large chunk of each day. Onboarding clients was another long-winded process, due to the stack of documentation you need to gather and have your client sign. If these challenges were unique to that firm, we probably wouldn’t have anywhere near as many businesses using AccountancyManager (AM) today.
Q: Two years and already so many users, what’s your secret? A: A fantastic team helps. We have a couple of
real-life accountants on staff, which is great for on-tap industry knowledge, as well as two ex-HMRC tax inspectors over the road as our advisors. We’re always on the look-out for new members of the team - especially awesome software developers (especially if you’re a qualified accountant too!).
NQ Magazine September 2019
But what it really comes down to is the product. We developed AM within the offices of an accountancy firm, literally writing the software in response to the problems happening around us. It quickly grew from automating as many time-consuming tasks as possible, to a full-blown cloud-based onboarding, CRM, time management, invoicing, practice management machine. It’s so satisfying to see everything we needed as accountants, now working to help other firms.
Q: Ok, give me an example - as an accountant, what was your biggest challenge? A: Probably the run up to the self-assessment deadlines. Obtaining the client’s paperwork, with all the correct information and in good time was always hard work. Add to that managing your own workload in preparing the submissions by the deadline and, let’s just say – it’s a little stressful!
Q: And how does AccountancyManager solve this? A: Think personalised, automated emails requesting
specific information, based on task statuses and deadlines. The client can then log on to their online portal (which can be reskinned with the accountant’s brand) to check data, provide information, e-sign documents and view a list of deadlines. Both AccountancyManager and the portal are cloud-based, so the accountants and their clients can access whatever they need, wherever they are. Freedom!
Follow-up emails chasing clients for specific missing information are triggered along the pipeline and any action required of the accountant are added to a daily task list. All activity on each client’s account, including any calls or emails, are stored in a client timeline (which is a great audit trail). ● You can sign up for a free 30-day trial
by going to www.accountancymanager. co.uk. Alternatively, call 01926 355 366 or email info@accountancymanager. co.uk
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