NQ Magazine, March 2013 by PQ magazine

MARCH 2013

THE VOICE OF ALL NQs Contact us

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LOOKING TO THE FUTURE

TENDERING & AUDIT P19

WHO OWNS YOUR CV? P11 Lisa Dendle on how you can ‘manage’ your CV

MARKETING MAKE EASY P16

What are the new ‘imperatives’?

Meet jonathan, aN NQ star Our NQ of the Year spills the beans

P20

STILL ILL…?

What we can learn from the Mid-Staffs scandal

TROUBLE AT THE TOWN HALL GOVERNANCE UPDATE P18 Sir Roger Carr on Cadbury’s code – an antidote to risk

How to tackle the moral maze of local government

P15

ADAPTABILITY

AT WAlkeR DenDle We hAve mAny DiFFeRenT AbiliTieS. ouR WillingneSS To ADAPT SeTS uS APART.

Walker Dendle Financial Recruitment has become established as a leading recruiter of professional permanent and temporary finance staff in Surrey and the surrounding area. We handle a diverse range of finance and accounting roles – from financial, management and commercial accounting to financial analysis and business partnering. We continually focus on adapting and refining our service to suit you, offering sound and knowledge based careers advice to part qualifieds seeking their next, all-important job move. For more information about the exciting range of career openings available though Walker Dendle Financial Recruitment, please contact: Permanent Division perms@walkerdendle.co.uk Temporary & Contract Division temps@walkerdendle.co.uk Walker Dendle Financial Recruitment Swan House, 51 High Street, Kingston, Surrey KT1 1LQ

020 8408 9999 www.walkerdendle.co.uk

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COMMENT

EDITOR’S COMMENTS Written just for you So here it is: your very own e-magazine that links you with the past – PQ magazine – and your bright future as a newly qualified. Hopefully together we can make the all-new NQ as big a success as PQ magazine. We also wanted to show you that there was someone out there who understands you need something different from what is out there at the moment! NQ magazine will be published every two months in 2013 and the next issue is due out on 30 April. That issue will be looking at what happens to women after qualification! But that’s for the future; right here, right now, we have some great contributors this month. Professor Malcolm Prowle discusses the Mid-Staffs crisis and how changing culture can be a massive undertaking (perhaps too big a challenge). We also have articles from Sir Roger Carr of Centrica and an ethical case study from the CCAB. There is also plenty of other useful stuff about how to make yourself stand out. Helping to guide you in your future career will be something we will continue to try to do in our own unique way. We are as always on your side and I think you will find there are fewer and fewer of people like us out there in the big bad world. Don’t forget that we need your help to spread the word about NQ, and do tell us what you want to see in the e-mag. The great thing is we can be really flexible in what we do here. Remember there are no limits! Hope it has been worth the wait. Graham Hambly, Editor

Future perfect page 8

ADDITIONAL CONTENTS News – ‘Future NQs will need broad shoulders’ Page 4 News – ‘Auditors are serving the management’ Page 7 ACCA report – 10 things to do in the next decade Page 8 Careers – Your CV: how to get a foot in the door Page 12 Cover story – Meet a prizewinning NQ Page 14

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NEWS

Auditors serving ‘the management’

Auditors are focusing too much on the need of management and not enough on what shareholders need, says the provisional findings from the Competition Commission (CC). The presence of audit committees and other safeguards adds no value, points out the CC, as the role of appointing auditors is seen as something management does. What we have then, said the CC, is a rather static market in which all too often audits don't fulfil their intended purpose, and thus fail to meet the needs of shareholders. There is also a concern that it is going to be tough to change a long-standing and entrenched system. But what the Commission want is to create a situation where tendering and switching audits becomes the norm, and where greater transparency and information increase both 'contestability' of the market and the ability of shareholders to judge the service they are getting. The Commission also wants to increase the shareholders and audit committee's influence over the choice of auditor. So, in essence, the Competition Commission wants to see: • Mandatory tendering. • Mandatory rotation of audit firm. • An expanded remit and/or frequency of Audit Quality review team reviews. • Prohibition of Big 4-only clauses in loan documentation. • Strengthened accountability of the external auditor to the audit committee. • Enhanced shareholder-auditor engagement. • Extended reporting requirements. The Competition Commission stressed it will take into account proposals for the audit market currently being discussed by the EU and how its package of remedies may interact with those. 4

UK watchdog probes Autonomy

Hewlett-Packard's takeover of Autonomy is to be investigated by the UK's Financial Reporting Council. Hewlett-Packard paid $11.1bn to buy Autonomy in 2011, but since then it has written off $8.8bn, of which $5bn was claimed to be 'linked to serious accounting improprieties, misrepresentation and

disclosure failures'. Autonomy's founder Mike Lynch has denied these allegations. FRC has said it wants to look at Autonomy's accounts from January 2009 until June 2011. The firm was audited by Deloitte's during this time. The FRC are not alone, both the serious Fraud Office and the US department of justice are already on the case. However, the claims of improprieties have confounded both Lynch and Deloitte.

Suffering burnout? One in three professionals are struggling to cope with stress at work, a new study has found. Burgeoning workloads is causing these normally talented people to become totally demotivated or to just leave their jobs altogether. Employers have

been warned they need to start looking for signs of ‘burnout’. Sosme of the signs are: frequent late nights, frequent disagreements with management/colleagues, increased sickness and emotional outbursts.

NQ Magazine Spring 2013

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ACHIEVE MORE. BECOME MORE.

NEWS

Future NQs will need broad shoulders Tomorrow’s CFOs will need to have broad knowledge across all areas of the finance value chain, from strategy to performance measurement, reporting, risk, assurance and compliance. A new report from the ACCA stresses finance leaders of the future will need these skills to be able to ask the right questions and ensure the businesses they work for is on the right track. ACCA CEO Helen Brand explained the research shows that recruiters are looking to appoint the complete finance professional, and seek out newly qualified accountants who have both the breadth and depth of skills. She stressed that more than 80% of the CFOs surveyed felt it was critical that their accountants understand the finance value chain and how it all fits together. Brand went on: “The finance team has

to meet the challenges posed by a post-crisis global economy which is increasingly volatile, complex and competitive. Given the breadth of financial activities that finance leaders are now engaged in, it is hardly surprising that they are looking to recruit employees with a broad range of skills

and understanding.” Due to these demands we can expect the career path of CFOs to look quite different to those today. There will be more mandated rotation through different parts of the function from ‘retained finance’ through to shared services or global business services. International

secondments on the CV particularly in emerging markets will carry greater value, and staff will need to be encouraged to take up roles outside the finance function. Interestingly, the research, one of the largest-ever surveys of the youngest generation in the global accountancy profession, also provides their view on their own future. There were two standout findings here. Firstly, the majority wish to pursue careers ultimately outside of mainstream finance roles and see a finance qualification as just a strong basis for a broad range future career. So, many don’t see themselves as career accountants, rather people with accounting skills. The second important factor was that these young professionals want it all to happen quicker.

Salaries under Get it right more pressure online Accounting salaries are under pressure with pay freezes even more common than they were a year ago, according to the CA Salary Survey 2012/13. To counter this freeze many organisations are extending the range of benefits they offer. The survey found that the median salary for a manager (qualified CA) in an accountancy firm ranged from just over £40,000 to £60,000, depending on the size of the practice. As a manger in industry a CA can command between £31,000 and £40,000 (in a small business) and up to £70,000 in a publicly listed company. NQ Magazine Spring 2013

Ian Wilkinson of recruitment specialist Wilkinson & Associates said: “This is no surprise, given where the economy is right now, and we can expect to see more of the same next year.” The survey points up the differences in the way men and women view equality, with 70% of male respondents believing ‘opportunities are equal’ for men and women within accountancy, while only 38% of female CAs agreed with the statement. Just one in four female CAs polled agreed, however, that gender quotas should be applied to company boards.

With more and more companies creating a Facebook page it is important that you start following the ones you are ‘interested’ in, explained Howett Thorpe’s Caterina Glenn-Russo (pictured). It is a simple way to see their vacancies and be kept informed, she told a packed ACCA network meeting recently. She also stressed it was important to make LinkedIn work for you as well. “It is Facebook for professionals,” she said. Glenn-Russo warned delegates that they should be careful when commenting online. “Keep it professional,” she said,

as if you are looking at jobs you must remember your employer may see it. In recent years there has been an increased trend for them to ‘Google’ names so that they can better understand candidates and learn more about them. Don’t then, she suggested, lose control of what they can see about you. Make sure you have set you privacy settings and untag any photos you wouldn’t want your mum to see! 7

ACCA REPORT

Looking to the future

The ACCA outlines the 10 things businesses and the accountancy profession should do in the decade ahead

usinesses and the accountancy profession have to be better prepared to anticipate and respond to the unprecedented challenges of a volatile global economy, says a new report. At the same time, firms need to be seeking and capitalising on all and any opportunities. Finance professionals around the world were asked to identify the key factors they thought they should be thinking about to prepare for in the next five to 10 years. Their responses helped to create the new study, called 100 Drivers of Change for the Global Accountancy Profession, by the ACCA’s Accountancy Futures Academy. The study has developed 10 strategic imperatives for business and the accountancy profession based on insights from the members of the 8

academy, as well as members of the IMA and ACCA’s other Global Forums, and experts working in and close to the profession around the world.

Five imperatives for business Businesses will need to assume and plan for volatility. With uncertainty the new norm, businesses have to factor in turbulence as a very real possibility and develop strategies for a range of different economic and market conditions. At the same time, they will need to build a ‘radar’ to prepare for a wide range of possibilities, tolerance of uncertainty and ‘seeing round corners’. At an operational level, development of a truly global model is becoming a priority that will require business to prepare for true globalisation. Leveraging technology effectively is

of high importance, as is developing the capability of management to work with, adapt to and get the best out of a multi-location, multicultural and agediverse workforce. With this, business will undoubtedly need to pursue technology leadership, as developments in ICT have placed technology at the heart of strategy and operations of businesses across all sizes. Finally, companies will need to develop a curious, experimental and adaptable mindset that is a critical success factor in an increasingly complex and fast-changing environment.

Five imperatives for the accountancy profession Accounting professionals will need to NQ Magazine Spring 2013

ACCA REPORT

embrace an enlarged strategic and commercial role. As businesses adapt to a turbulent environment, opportunities are emerging for accountants to assume a far greater organisational remit across all aspects of corporate decision making, from strategy formulation through to defining new business models. The profession will also need to focus on a holistic view of complexity, risk and performance and establish trust and ethical leadership. There is growing consensus on the need for reporting to provide a firmwide view of organisational health, performance and prospects. Such a holistic perspective must acknowledge the complexity of modern business and encompass financial and nonNQ Magazine Spring 2013

financial indicators of a firm’s status and potential. The fourth strategic action is to develop a global orientation. The pace of global expansion of firms from developed and developing markets alike is placing the spotlight on accountancy’s ability to master the technical, language and cultural challenges of cross-border operations. The final strategic action for the profession is to reinvent the talent pool. The diverse range of demands on the profession is forcing a rethink of everything from recruitment through to training and development. Entrepreneurial spirit, curiosity, creativity and strategic thinking skills could assume far more significance in the selection of tomorrow’s accountants.

Long-term thinking “The fact that these drivers for change have been identified by those working in accountancy clearly demonstrates the profession is willing and able to engage in long-term strategic thinking,” said ACCA Director of Policy Ewan Willars. “The key question is what do we do with these powerful insights. It is now up to the profession to ensure it meets the public’s needs for the highest standards of integrity, while taking a broader leadership role in both NQ business and society.”

● To see the report go to www. accaglobal.com/en/researchinsights/accountancy-futures/ drivers-change.html

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Win a case of champagne!

One of our mainstays of fundraising is by giving EVERYONE the opportunity to win a case of champagne and a month’s worth of advertising on our website by sponsoring a balloon in our online virtual balloon race. You even have the option to track your balloon’s journey on a Google maps-based program! We organise 10 balloon races per year and the event that we’re currently organising is aimed at raising the funds needed to continue supporting our 8500 members who are shunt dependant due to having the condition hydrocephalus (Åuid on the brain). If you are able to support Shine in any way please contact Asif: E: asif.shaheed@shinecharity.org.uk or T: 01733 421348

WinnersWearYellow WinnersWearYellow is a simple fundraising idea. You can fundraise on your bike for Shine and help us as we support thousands of people living with spina biÄda and hydrocephalus. You can cycle around the park, you can cycle from John O’Groats to Land’s End, or you can circumnavigate the earth! Whatever distance you choose to cover, we will be on hand with advice and support to ensure you get the most out of your experience and raise as much money as you can. We have bespoke Shine cycling jerseys and, subject to a minimum donation, you will receive one of these when you sign up to cycle for Shine. Alternatively you can purchase a jersey for £35.

So, what are you waiting for?! We really want to hear from you and learn more about your plans to fundraise with us. Everyone’s a winner, when WinnersWearYellow winnerswearyellow.co.uk // 01733 421351

YOUR CV

Do you really know where your CV is? Lisa Dendle warns of the potential dangers of posting your CV online

ome years ago a friend of mine’s son, an elite athlete, was facing exclusion from the national team after being spotted by his coach on a social networking site proudly brandishing a can of “the country’s leading beer”. His mother read him the riot act; not least about grasping his responsibility to his country more seriously, but also for not taking advantage of the widely publicised privacy settings that could have avoided the whole unhappy episode. Awareness about how to use social networking prudently has been top of the agenda in recent years, with stories focusing on prospective employers using information obtained from the web as an important element of the selection process. So why is it that professional work seekers are still happy to post some of their most personal and sensitive information online for all to see? It is inevitable that the ease with which we communicate with our friends and family would eventually influence how we engage with prospective employers and recruiters, but I would nonetheless encourage caution when putting your professional life in the common domain. CV databases have become a vital tool for recruiters, but can you be sure that the information is always used as you intended? In your desire to seek a new job you are telling the community at large where you NQ Magazine Spring 2013

live, where you work, and how much you earn. Enough information for an employer or a recruiter to qualify you – but how confident can you be that the gatherer of the information is the sort of firm that you wish to be associated with? Many candidates report that on uploading their CV they are inundated with calls – flattering, but disruptive, particularly if you are at work – but often without proper follow-up. Some work seekers state that they are plagued by emails from random sites that they have not knowingly engaged with, implying inadvertent consent to the sharing of confidential and highly personal information. Do you always check what you are signing up for? Agencies with no formal contract or agreement with you can make use of this now ‘non-proprietary’ information without your express permission, and many do. Recently, I learned of a situation where a candidate in the process of fine-tuning an offer was disappointed to learn that his CV had been resubmitted by a second agent, who had recognised its value and taken ownership. In spite of assurances that the candidate had not instructed another recruiter at such a crucial point of the negotiations, the other party was adamant that he had and the process was very nearly derailed. You could argue that no real harm was done, but it was not the ideal start to a new job!

In these recessionary times many employers have elected to use direct methods of recruitment. Some larger organisations have hired teams of ‘talent acquisition’ scouts, whose raison d’être is to scour CV boards and contact sites for talent. Have you considered the consequences of your details being on view? Your presence on certain networking sites indicates that you are out there and in touch, but your details on a database shouts “I’m looking for a new job!” I am not suggesting the boycotting of CV database sites. On the contrary, as a professional recruiter we rely heavily on, and pay handsomely for, access to the very best talent on the market. There is no doubt that, for candidates; they represent an excellent route to the market. Instead, I’m suggesting a more prudent approach. Make sure you research the most relevant sites for your background and examine the small print. Encourage contact by email rather than phone; this will offer the opportunity to vet the agencies that you subsequently register with. Choose a recruiter that has a sound reputation in your area and your discipline and make sure you meet them, as this is the best way to establish their credentials and capability to market you expertly in a competitive market, and insist on feedback on where your CV is sent. Staffing companies are all governed by strict conduct regulations and are obliged to handle your application in a professional and ethical fashion. In my view, this collaboration offers the best of both worlds: you retain the ability to use social networking to establish vital relationships for your career, now and in the future, but will also guarantee your complete control over job applications made on your behalf. NQ

● Lisa Dendle is managing director of Walker Dendle 11

YOUR CV

Getting a foot in the door

Your CV is your first contact with a prospective new employer. Paresh Dabasia explains how you can make sure it’s not your last

o you finally got qualified – well done on making it through to the other side! But what should you do now – apart from catching up on the three years of social life you missed? An ACA finalist accountant who had worked both in practice and industry, I decided to move into accountancy recruitment due to the difficulty of transferring training contracts during the last recession. Over the past few years I have been able to advise and assist candidates on CV presentation and detailed interview techniques. I have recruited for both FTSE clients and SMEs. Each year sees another batch of newly qualified accountants seeking their next opportunity; the competition to secure jobs is very intense. To help stand out from the crowd, here are some top tips on CV presentation. One of the big constraints in the recruitment market is time. Recruiters need to cut the burgeoning list of applicants to a manageable number, and be able to quickly shortlist the 12

relevant candidates with the relevant experience. Don’t think the recruiters review all the CVs they get in detail; many scan a CV in 20-30 seconds. Ultimately, your CV is your first impression, and if you don’t take responsibility to draft an effective CV that makes an immediate impact your application will be missed and probably end up in the recycling bin. Presentation wise, your CV should be consistent and easily readable. Use a professional font and point size (Arial 10-point is a good recommendation). Your responsibilities and achievements should be set out in bullet-point format and not long paragraphs. Make your sentences punchy and concise, as your objective here is to get through the initial selection and secure an interview. Remember, the client can always arrange a telephone call or face-to-face interview with you if they want to know more about you. In the box on the facing page are the some of the key NQ Magazine Spring 2013

YOUR CV

Your CV should have the following information… Contact details: This should clearly highlight your name in bold, with the remaining details underneath to maximise the space available. Profile summary: A few bullet points to highlight achievements such as first-time passes, the employers you have worked for and a bit about yourself. Nationality: Stating any visa details if appropriate. Education: This should state the institution’s name, subject and grades obtained for your degree and A-levels – ideally with a UK equivalent if you have studied abroad. You should also summarise your GCSE results. Professional qualifications: State your professional body and the year you qualified (I would highlight any excellent grades obtained in modules that are relevant to your ideal role). Interests: Apart from travelling, sometimes a funky activity may make your CV stick out in a recruiter’s mind. This puts you in front of the competition. Languages: Only mention languages you are conversational in (at the very least). Systems: List these in bullet points with your proficiency in brackets.

scenarios I have encountered that should be addressed to help make your CV sharper. One common mistake I come across is committed by candidates who have progressed within their current company; they treat each role as if it were with different companies and so duplicate all the company’s details. The date you started and ceased working for an employer should be written in the left margin. Other dates reflecting a change in role should appear in the main text, in brackets above the role title. Never list duties you have not undertaken. Clients are increasingly testing candidates on various accounting/ NQ auditing issues so you may get caught out.

Work experience: This is the most important part of your CV. In reverse order, make sure the points are relevant to the role you are applying for and clearly state your achievements and your contribution to a major project. Beneath the company name always write a brief description about the industry and size indicators such as company turnover. If you worked in practice you must highlight the clients or industries you have audited. Do not: Use accountancy or industry jargon – your CV should be understood by non accountants, too. Finally: When sending out your CV make sure you save it on a widely used format such as Word 2003 (not Word 2007, as some clients may not have upgraded their systems). A safer option would be to send in a PDF format.

● Paresh Dabasia is a recruitment specialist at BlueCrest Recruitment. For more information see http://bluecrestrecruitment.co.uk NQ Magazine Spring 2013

Q&A

Star of the show Meet Jonathan Simons, our recently crowned NQ of the Year Q What did you do to celebrate when you found out you had passed all the exams? It was great to hear that I’d passed all my exams, but getting them at 5am on a Friday meant another day of work ahead, and given I was already up I started work even earlier than usual! However, at the weekend I let my hair down with friends and went out for a family meal to celebrate. Q You qualified with Grant Thornton at the tender age of 22. Does being so young come with advantages/disadvantages? One advantage of qualifying at such an age is that, come qualification, you already have a number of years’ experience behind you. The world really is then your oyster; accountancy qualifications open so many doors and you can’t complain at having so many options so early in your career. A disadvantage is that when you’re in a client facing role; you sometimes have to work that little bit harder to build relationships, especially as a number of people who are reporting to you may be older!

Q Congratulations Jonathan – how does it feel to be our NQ of the Year? It feels fantastic; over the past four-and-and-a-half years I’ve worked hard to develop not only business, but also others around me, and it’s great to have that hard work recognised. Being NQ of the Year has helped me keep my drive and motivation and it’s a nice feeling to walk through the front door and see a shiny PQ award on my shelf! Q What is the best thing about qualifying as an ACCA? Although I’d like to take on further academic studies in the future, to finally pass all my ACCA exams was a relief and ended one of the ‘journeys’ I’d been on since I joined Grant Thornton. The qualification gives you a broad knowledge base and one of the most enjoyable parts of my job is being able to relate text book learning to real life situations with clients. Getting Personal The job: Assistant Manager, Audit, Grant Thornton. Best thing about being an accountant: Having the chance to win a PQ award! It also opens lots of doors and you learn a significant amount regarding the world of business and finance in a relatively short period of time. Thing most hate in others: 14

Dishonesty. Best personal trait: Intellectual curiosity or confidence. Best thing about your job: The variety and getting to work with other highlymotivated and

Q We understand you are an expert in professional scepticism – what did you learn here? The application of professional scepticism throughout the audit process is essential; in essence, this is all about maintaining a questioning mind. Being within audit for over four years has given me some fantastic practical experience, but I’m also fortunate enough to have a great technical team supporting me. Q What is your career plan? In the medium term, the plan is to keep working hard and continue to learn; there are a number of fantastic opportunities at Grant Thornton and it’s full of talented individuals who can help me develop and realise my potential. I’d like to get involved in the wider accountancy profession where possible by joining a panel or taking on a NQ treasurer’s position to put my skills into practice. ◆ Jonathan was joint NQ of the Year 2013 with Saad Mir

talented individuals. Dream job: Professional footballer. What are you reading at the moment: Liar’s Poker by Michael Lewis and The Pelican Brief by John Grisham. Last download: Bruno Mars – Unorthodox Jukebox. If you were a film who would play you: Matt Damon. NQ Magazine Spring 2013

ETHICAL DILEMMA

Trouble at the town hall How would you deal with political pressure? In the first in a new series we tackle the moral maze that is local politics Outline of the case The year end accounts for a local authority have been prepared, and they will soon be adopted by the council, ready for audit. You are the head of social services finance, and you have become aware that some work has been performed by a consultant that has resulted in a proposal to close an elderly persons’ care home. The council members want to suppress this information from becoming public knowledge because there is a forthcoming by-election in the electoral division where the care home is located. The consultant has agreed not to submit the invoice for their fees, which are significant, until after the byelection. Normal accounting treatment would require the consultant’s fees to be included as an expense in the accounts. Additionally, the estimated costs of the potential closure may need to be included as a provision in the accounts. The members will not make their decision known until after the byelection, which will be after the audit has been completed and the opinion signed.

Key fundamental principles Integrity: How can you ensure that the accounts are an accurate and honest representation of the council’s activities? You cannot allow yourself to be involved in the publication of information that is misleading. Professional behaviour: You are required to perform your work in accordance with applicable law and regulations, including relevant NQ Magazine Spring 2013

accounting standards. How should you act so as not to discredit yourself or your profession?

Considerations Identify relevant facts: Consider the Local Government Code, generally accepted accounting standards, and applicable law and regulations. Also, establish the extent of the potential misstatement of the accounts. What is the likelihood that the council members have already decided to act on the consultant’s advice, in which case the provision for the costs of closing the care home is also required? Could past accounts have been misleading as well? Identify affected parties: Affected parties include you, the council, council members, the consultant, the occupants of the care home, and the electorate.

Who should be involved in the resolution As the intention to conceal the consultation exercise is that of the council members, you should involve the leader of the council in the resolution process. You should also consider involving other senior managers, the internal audit department, and the external auditor.

Possible course of action The consultant’s fees are significant, and so they should be included in the local authority’s year end accounts. You should establish, through discussions with senior management, whether the accounts should also reflect the

proposal to close the care home. You should try to explain to your colleagues the accounting principles that require the liability in respect of the consultant’s charges and the potential provision in respect of the closure of the care home to be accounted for. You should make clear your professional and ethical responsibilities, and be prepared to discuss the issues with the leader of the council, if necessary. You could notify the central finance team, who may decide to bring the matter to the attention of those responsible for internal compliance (e.g. the internal auditors). They should also immediately notify the external auditors. If it appears necessary to whistleblow to third parties, you should consider carefully to whom you should report, bearing in mind the fundamental principles of confidentiality and professional behaviour. You could consult your professional body for advice, and consider seeking independent legal advice. You should determine what access you have to organisations that can offer guidance and support to employees who find they have a whistleblowing responsibility. You should document, in detail, the steps that you take in resolving your dilemma, in case your ethical judgement is challenged in future. NQ

● Thanks to the CCAB for this article. More ethical case studies are available at http://www.ccab. org.uk/reports.php 15

MARKETING

How to grow an accounting firm

Romeo Richards outlines the fundamental difference between the profession of accounting and the business of accounting

once contacted an accountant to create a cash flow forecast for me. When he sent me the final document I discovered some discrepancies. When I asked him to rectify them, he demanded additional fees because it was my fault that I did not provide him all the information in the first instance. He already had the formula in his system. All he had to do was change the figures, which would have taken him about 15 minutes. But he chose to lose a client rather than modify the document. As you read this you might be thinking to yourself that the accountant really messed up. The reality is that 16

this is how a large portion of the accounting industry operates. The key question is why? The answer? The majority of entrepreneur accountants are good accountants but bad entrepreneurs. Many accountants fail or struggle because they are of the opinion that by virtue of the fact that they know how to crunch numbers, they know how to run a successful business. There is a fundamental difference between the profession of accounting and the business of accounting. There is a completely different skill set required to succeed in the profession of accounting and the business of

accounting. The business of accounting has three core functions: ◗ Marketing: acquisition of clients. ◗ Operations: delivery of service. ◗ Finance: number crunching. The accounting firms that succeed are those that are good at all three. The least important of the three is finance and the most important is marketing. Without clients, there will be no opportunity for service delivery. Neither will there be numbers to crunch. Consequently, as an entrepreneur accountant, your key function in your business needs to be client acquisition and retention. NQ Magazine Spring 2013

MARKETING to provide prospects to try your firm and the unique experience clients have from transacting with your firm. Market: It does not matter how good your message is, if it is shouted in deaf ears you will be wasting your time. Consequently, you need to ensure you identify the right target market. All businesses need accountants; however, not all businesses are going to hire accountants. So you need to ensure you target those businesses that are likely to be receptive to your message. Media: When you have achieved a message to market match, the next step is identifying the right media to place your marketing message. Deciding whether to use: social media, Yellow Pages, newspaper or radio. This is why going through the first two steps are very crucial because it enables you to easily identify the location of your target market.

2. Increasing the transactional volume with each client As an entrepreneur accountant you need to view your business with an economic instead of a service lens. What this means is that you do not just focus on what your client might need in the initiate transaction. If you prepare end of year report, you need to consider the fact that they also needs: payroll, VAT, self-assessment. So offer them those services or bundle them at a discount.

HOW TO ATTRACT CLIENTS There are three effective strategies for growing an accounting firm: ◗ Generating new clients. ◗ Increasing the transactional volume per client. ◗ Increasing the frequency per transactions.

1. How to generate new clients Effective accounting firm marketing depends upon three things: ◗ Message ◗ Market ◗ Media Message: Whenever I want to market my services to accountants the first question I ask them is, what makes your firm different from your competition? If I spoke to 10 accountants I will get the same 10 answers, just expressed in different words. You message is your statement of benefit or unique selling preposition. It is also the incentive you are willing NQ Magazine Spring 2013

3. Increasing the frequency with which transactions occur A client might only visit your firm at the end of the year when they need self-assessment or an end-of-year report. However, by offering them VAT or payroll you now ensure a monthly or quarterly transaction, thereby increasing the frequency of transaction. Implementing just two or three of the ideas in this article can increase your client number tremendously. NQ

● Romeo Richards is the founder of The Business Education Center, which serves as a business intelligence hub for accounting firms. He is the author of: How to Effectively Market and Manage an Accounting Firm. For more information visit http:// theprofitexperts.co.uk/How_ To_Market_And_Manage_An_ Accounting_Firm 17

REGULATION

Adherence to Cadbury spirit

Sir Roger Carr explains how the UK Corporate Governance Code provides an antidote to the risk of corporate failure

n response to every corporate catastrophe, rules and regulations have been developed and expanded in order to ensure the same error is never repeated. Catastrophes may vary in nature but the causes have common roots: excessive concentration of power, lack of transparency in reporting, and insufficient interest by owners, until it is too late. To address these issues, Sir Adrian Cadbury led the committee that developed a core set of principles – modified and amplified by others over the years – that has stood the test of time as the UK Corporate Governance Code. In the UK we have been wise to adopt the principle of code not law and ‘comply or explain’ – a far cry from the American and European focus on legislation, which has often brought bureaucracy and cost rather than resolution. In its favour, the Code provides an antidote to the risk of corporate failure by accident or arrogance – it will never beat criminal intent but continues to guide the inexperienced, focus the ambivalent and control the adventurous. Most importantly, it encourages adherence to the spirit of the rules rather than simple obedience to the letter of the law. Its weakness is the lack of prescriptive definitions against which the rule may be implemented and enforced. Compliance and explanation are only effective tools if judgement and challenge are carefully applied by those in the position of ownership. To complete the process shareholder engagement is essential where stewardship becomes a mindset – not 18

an afterthought. One shareholder spring doesn’t mean that all owners are engaged. Hedge funds and short-term traders have little interest in governance – their ‘raison d’être’ is performance. Whatever the good intentions, short-term performance continues to be the priority for many and longterm partnership perspectives for the enlightened few. It is up to business leaders therefore, working in partnership with owners, to convert the few to the many and to ensure that doing the right thing in business is viewed as the right thing to do. The UK Corporate Governance Code provides the route map. The depth of compliance and quality of explanation are the milestones of effectiveness. At the end of the day, however, companies and shareholders must remember that rules and regulations will not work without the right corporate culture. This is about values. It requires management to know instinctively the difference between right and wrong, and having the courage to follow it through. It needs organisations that set a standard at the top – not by what is

said, but by what is done. It means ensuring that acceptable behaviour is understood to be not what you do in public – but how you act in private. It requires pressure testing the actions and deals done behind closed corporate doors against a benchmark of potential front page tabloid visibility. It is not rules and regulations alone that make good business. It is good people – operational, advisory, executive and non executive. A diverse board of gender, nationality, skill set and mind set. A board comprising members with integrity, enthusiasm, experience and courage – and independence of mind – up to speed on the rules and willing to stand up for their enforcement. It takes skill, knowledge but, most of all, it takes character. Performance and governance must go hand in hand. The Code based on ‘comply and explain’ is a valuable handbook. In business, however, we should never forget: rules provide the framework – people make the NQ difference.

● Sir Roger Carr is Chairman, Centrica plc, and President, Confederation of British Industry This article is taken from the Financial Reporting Council’s collection of essays, Comply or Explain: 20th Anniversary of the UK Corporate Governance Code Essays

Financial Reporting Council

Comply or Explain 20th Anniversary of the UK Corporate Governance Code

NQ Magazine Spring 2013

FRC UpdaTE

New audit tender rules are unveiled The FRC has suggested that firms should put tenders out every 10 years. We outline other updates to the governance codes

he Financial Reporting Council (FRC) has unveiled what it calls ‘limited changes’ to the UK Corporate Governance and Stewardship Code. The aim is to increase accountability and engagement through the investment chain, and both codes will continue to apply on a ‘comply or explain’ basis. Let’s look at some the changes to the UK Corporate Governance Code: ◗ FTSE 350 companies are to put the external audit contract out to tender at least every 10 years, with the aim of ensuring a high-quality and effective audit, whether from the incumbent auditor or from a different firm. The FRC will be holding discussions with companies, auditors and investors to consider whether guidance on tendering would be useful. ◗ Audit committees are to provide to shareholder information on how they have carried out their responsibilities, including how they have assessed the effectiveness of the external audit process. ◗ Boards are to confirm that the annual report and accounts taken as a whole NQ Magazine Spring 2013

are fair, balanced and understandable, to ensure that the narrative sections of the report are consistent with the financial statements and accurately reflect the company’s performance. ◗ Companies are to explain, and report on progress with, their policies on boardroom diversity. This change was first announced in October 2011, but its implementation was deferred to avoid piecemeal changes to the Code. ◗ Companies are to provide fuller explanations to shareholders as to why they choose not to follow a provision of the Code. Changes to the Stewardship Code include: ◗ Clarification of the respective responsibilities of asset managers and asset owners for stewardship, and for stewardship activities that they have chosen to outsource. ◗ Investors are to explain more clearly how they manage conflicts of interest, the circumstances in which they will take part in collective engagement, and the use they make of proxy voting agencies. ◗ Asset managers are encouraged to

have the processes that support their stewardship activities independently verified, to provide greater assurance to their clients. FRC chairman Baroness Hogg emphasised the changes are designed to give investors greater insight into what company boards and audit committees are doing to promote their interests, and to provide them with a better basis for engagement. Hogg stressed that the FRC has aimed to keep these revisions to a minimum and change only those elements of the codes where consultation indicated real NQ improvements could be made.

● Baroness Hogg: revisions kept to a minimum 19

NHS finances

How do we avoid a repeat of Mid-Staffs? Malcolm Prowle argues that the NHS’s high-profile problems are more a matter of leadership than finance

he report on the Mid-Staffs NHS Foundation Trust makes appalling reading for any of us, let alone those who were intimately involved. Worryingly, there is some evidence to suggest that this is not an isolated case. Five other hospital trusts are to be investigated over their mortality rates following the publication of the Mid-Staffs report. It said that an immediate probe is to be launched into Colchester Hospital University NHS Foundation Trust, Tameside Hospital NHS Foundation Trust, Blackpool Teaching Hospitals NHS Foundation Trust, Basildon and Thurrock University Hospitals NHS Foundation Trust and East Lancashire Hospitals NHS Trust. Furthermore, a firm of solicitors is representing relatives and patients with regard to legal action at 10 NHS Trusts. 20

If this is the case, then I suggest we cannot just dismiss Mid-Staffs as an aberration; we must look for more systematic causes and solutions. In spite of the length of the inquiry and the efforts put into to it by the inquiry team in coming up with 290 recommendations, I am not convinced it really hits the nail on the head and comes up with workable solutions. At first glance, it seems to me that the inquiry report is correct when it talks about the need for fundamental change and shifts in attitudes and culture in the NHS. However, it is also not clear to me that there is any evidence that the cultural changes needed will be achieved by legislation, criminal charges, regulation, inspection, greater ministerial supervision and other controlling methods. Changing cultures

is much more subtle than that. Firstly, let us deal with the resource issues head on. I find it difficult to believe that patients being forced to drink water from flower vases and lying in soiled sheets for many hours is a consequence of financial pressures. For goodness sake, in many years over the past decade the NHS has had record growth in resources and more modest growth in other years. Furthermore, between 1997 and 2006 the Royal College of Nursing’s own figures show that the number of qualified nurses in the NHS grew by 25% in England and around the same in the rest of the UK. Can we really believe that this sort of behaviour can be put down to ‘lack of resources’ or ‘pressure of work’? I know from personal experience that there are NQ Magazine Spring 2013

nhs finances many dedicated and hard-working professional nurses, but am I the only person to have noted in some hospitals four or five nurses sitting at the central station in a ward chatting or texting? It looks more to me that a lot of the problems of Mid-Staffs can be put down to a lack of proper professional leadership in the nursing profession, not a shortage of resources. Secondly, there is an issue about the role of effective financial management and control in an NHS Trust. The inquiry report comments that it was the board that took the decision to pursue a cost-cutting drive to achieve Foundation Trust status and it was the board that refused to listen to the complaints of patients and – at times – staff. Now whether the board went too far in a drive to cut costs I do not know, but what I do know is that there is a balance that must be struck between the delivery of services and effective financial planning and control. The reality is that NHS Trusts have finite resources and have to deliver services within that resource constraint. This problem will not go away no matter how many inquiry reports are produced. The danger now is that NHS Trusts will go too far in the other direction and take decisions resulting in huge financial overspends. This is particularly a concern at present, in a period of financial austerity where NHS Trusts are having to identify large-scale savings. Research I recently completed on financial governance in NHS Trusts suggests that there are significant weaknesses in NHS financial governance that will be exacerbated by the pressure of austerity (http:// www.publicservice.co.uk/feature_story. asp?id=21388). Thirdly, I would also focus on the relationships between managers and healthcare professionals in the NHS. In my 35 years’ experience of the NHS it seems to me that this relationship is at best somewhat distant and at worst antagonistic and lacking in trust. Healthcare professionals often see NHS managers (or administrators as they prefer to call them) as ‘the enemy’, involved in collaborating with government to deny them the resources they need to treat patients as they think fit. On the other hand, NHS managers often see healthcare professionals as unwilling to accept the realities of finite resources, defensive about their own professional status and practices and NQ Magazine Spring 2013

unprepared to engage, fully, in the decision-making process as to how resources should best be used. Anyone who doubts his situation exists should have a look at TV programmes such as Casualty or Holby City to see how NHS managers are portrayed. This week I heard a debate on the radio about the NHS involving a number of healthcare professionals and a politician (no, there was no NHS manager invited). As usual, the cry came up for a greater involvement by healthcare professionals in decision making in the NHS. Similar arguments were heard at the time the Health and Social Care Act 2012 was going through Parliament and indeed subsequent changes were made to take this on board. I actually think most

I find it difficult to believe that patients being forced to drink water from flower vases and lying in soiled sheets for many hours is a consequence of financial pressures NHS managers would welcome such increased involvement and engagement by healthcare professionals provided those healthcare professionals accepted the realities of finite resources and were also prepared to be fully accountable for those decisions that they were involved in and would not stand on the sidelines carping. Let me take an example to illustrate this point – the issue of budgetary management in the NHS. In my experience, healthcare professionals often argue for them to hold budgets and have more influence on the way resources are used. However, when we explore this further what this often means is that while they want to get their hands on the money, they do not usually want to: ◗ Deal with the administrative workload associated with managing budgets. ◗ Deal with, for example, problems

such as high levels of staff sickness or maternity cover that impact on budgets. ◗ Deal with the pressures of declining budgets caused by financial austerity. ◗ Be accountable for the services they provide on the resources available. If any of the above takes place the usual response is to pass the problem to managers or administrators to deal with. In conclusion, I think it is essential that cultural change takes place in the NHS if we are to avoid repeats of the Mid-Staffs scandal. However, I am not convinced that the inquiry’s recommendations are the way forward. There has been much written about how organisational cultures can be changed and the first thing to say is that it is difficult. The other thing we could do is heed the words of John Kotter, a global expert on cultural change in organisations. He makes a number of key points: What is the nature of the problem? Firstly, virtually no one clearly defines what they mean by culture, and when they do they usually get it wrong. Secondly, virtually no one has read the original research that shows why culture, when clearly defined, is so important, how it is formed, and how it changes. How does culture change? It changes by a powerful person at the top, or a large enough group from anywhere in the organisation, deciding the old ways are not working, figuring out a change vision, acting differently, and enlisting others to act differently. If the new actions produce better results, then this is communicated and celebrated, and if they are not killed off by the old culture fighting its rearguard action, new norms will form and new shared values will grow. What does NOT work in changing a culture? Some group deciding what the new culture should be. Drafting a list of new values that are passed to the PR or HR departments with the order that they tell people what the new culture is. They cascade the message down the hierarchy, and little to nothing changes. In Kotter’s words: that’s the whole story. Which path to cultural change will the NHS take? NQ

● Malcolm Prowle is Professor of Business Performance at Nottingham Trent University 21