Are Accountants Doing Enough?
It is not unreasonable to postulate that many of the business owners who pay us to produce accounting reports are confused by much of what we prepare. Yet they front up year after year to buy a repeat dose.
If this is true, the question is “Are we doing enough?”
Tracking Profitability Weekly
A previous head of the Business Management faculty at the University of New England, a man I was lucky to meet decades ago, four to be precise, believed our profession was failing in its duty to business owners. His name was Professor Keith Cleland and he encouraged accountants to present financial information to clients in a manner the clients understood. More importantly, he recommended accountants should provide the managers of businesses, large and small, the means to easily track profitability weekly.
This was in the mid-1980s, a time when business owners did not have access to computers and accounting firms had a single machine, albeit large and noisy, locked away in a temperature-controlled room guarded, usually, by a very bossy person.
Yet in this environment Cleland insisted we provide management with a tool to track profitability weekly and reminded us that one existed.
Fast forward 40 years and here we are – in the cloud, where both management and their external advisors have access to real-time data – a luxury beyond our wildest imagination back in the 80s. Now I hear the ghosts of accountants long past ask this question “How many business owners are tracking profitability weekly?” And I expect they will be disappointed to learn it is not enough.
This is an extract from a 1997 interview with Professor Cleland.
“Even if accountants can deliver their reports within two weeks of month end, those reports cover some events that took place up to six weeks earlier. The belief that management advisory services could be delivered by accountants to their clients in the form of monthly financials compared with target plus a forward cash flow and a few ratios thrown in for good measure was shown to be one of the great deceptions. From a management viewpoint, financials, delivered three to four weeks after the event, however nicely bound, were as full of accounting gobbledygook as the annual financials and invariably found their way into the same bottom draw.”
Cleland did more than criticise his own profession, he was a CPA, he provided the guidelines by which to deliver to clients a process to track overall profitability, as well as contribution by project/job/activity/product/ in a timely manner allowing for corrective action if required and or the seizing of opportunities for super profit.
Measuring Productivity & Targeting Improved Performance
I was lucky enough to work in a firm where the leaders drilled into us Cleland’s philosophy and processes. I have found them of benefit throughout my career and in recent years the access to real time data has magnified their usefulness.
If you read the document I attached to this recent post you will have received an insight into one aspect of Cleland’s work – his method of measuring productivity and using the results to target improved performance.
If you want to deep dive into this topic join the 14 CAs who have already registered for the free online workshop and tutorial series commencing on Friday 31st March – Introduction to Performance Reporting Productivity and Profit Improvement.