Accountants' New World: The Essential Guide to Being a Valued Business Partner

By Malcolm Simister

All accountants, whether in commerce, industry, government, the not-for-profit sector or the accounting profession, must change significantly to remain relevant by becoming commercial, value adding business partners. This book shows how.
Accountants' worlds are changing fast, so much so that in a few years' time accountants as we know them today may not even exist, for two reasons. Firstly, accountancy often tops the list of professions facing automation; it is likely that computers rather than accountants will count the beans in the near future. Secondly and fortuitously, to help them thrive businesses need their accountants to work closely with business managers to improve commercial outcomes, to transform into valued business partners.
But to be valued business partners, accountants must change and upskill. They must build on their accounting and financial expertise to thoroughly understand their business and industry, develop and use their commercial acumen to identify and implement business initiatives, learn how to analyse and communicate proactively and quickly and know how to partner with business managers at all levels competently.
For those accountants who make this transformation the future is bright with fulfilling and stimulating carers awaiting them, but the future for those who don't is bleak.
This book is a practical guide for accountants to transform themselves into valued business partners. It is essential reading for all accountants.

• Language: English
• Publisher: Xlibris AU
• Release date: Feb 26, 2016
• ISBN: 9781514444993

Malcolm Simister

Malcolm Simister is an English and Australian-qualified Chartered Accountant with more than thirty years' finance and business experience in the accounting profession, industry and consulting. His background is with a `Big 4' accounting and consulting firm and senior finance positions, including as chief financial officer, in large, international energy, resources, retail and consulting engineering businesses. In 2003 he established his own successful business consulting to CFOs of large companies and government departments and became a partner in a specialist, international CFO consultancy. He now runs his own training business that transforms accountants into finance business partners and educates business managers and company directors about finance. Originally from England, he lives and works in Melbourne, Australia and spends several months each year living and working in Britain.

Book preview

ACCOUNTANTS’

NEW WORLD

The Essential Guide to being

a Valued Business Partner

MALCOLM SIMISTER

Copyright © 2016 by Malcolm Simister.

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Rev. date: 02/26/2016

Xlibris

1-800-455-039

www.Xlibris.com.au

723692

CONTENTS

Acknowledgements

Introduction

Chapter 1: It’s Your Future, Your Choice, Your Career

Chapter 2: Understanding Your Business and Industry

Chapter 3: Developing and Using Your Commercial Acumen

Chapter 4: Participating in Managing Business Performance

Chapter 5: Analysing: an Introduction

Chapter 6: Analysing Unexpected Events

Chapter 7: Analysing Business Initiatives

Chapter 8: Analysing Business Performance

Chapter 9: Advising and Partnering with Business Managers

Chapter 10: Implementing Business Initiatives Successfully

Chapter 11: Making the Time

Chapter 12: Driving Your Career

Appendix 1: Communicating Effectively in Writing

Appendix 2: Communicating Effectively Verbally

Appendix 3: Communicating Accounts in Plain English

About the Author

DEDICATION

For Dianne, Jonathon, Cameron, and Alexander with thanks for the tapioca, and to my mother who made it possible in so many ways.

ACKNOWLEDGEMENTS

Over the years, many people have provided ideas, experiences, and inputs into making this book possible. I would particularly like to thank John Battiston, Brett Comer, Josie Gibson, Michael Nazzari, and Tania Tytherleigh, but most of all Dianne, my wife, for her unfailing support.

The quote in chapter 1 from Who Moved My Cheese by Dr Spencer Johnson is reproduced with kind permission of the publisher.

INTRODUCTION

‘In the middle of difficulty lies opportunity.’ Albert Einstein, theoretical physicist.

All accountants, whether in commerce, industry, government sector, not-for-profits, or accounting profession, face irrelevancy. All must transform into valued Finance Business Partners to stay relevant and have a job in future.

As in many professions and jobs, accountants’ worlds are changing fast. In a few years’ time, there may not even be a need for any accountants at all, as we know them today. Accountancy often tops the list of professions facing automation; accounting is, after all, just a set of rules that computers can follow.

If technology has advanced to the stage of driverless cars being practically possible for widespread use on our roads in the foreseeable future, drones having the potential to deliver anything from pizzas to medical aid, and robots being able to carry out a range of complex tasks that only humans could hitherto manage, automating accounting is easy. The only wonder is why it hasn’t happened already.

But, of course, accounting is already partially automated. Computers now do, in the blink of an eye, bank reconciliations and depreciation calculations that used to take hours; recurring journals and lease accounting entries just happen every month; accountants no longer have to transcribe numbers from the trial balance to the accounts. But that’s nothing compared to what’s coming. Moore’s Law, named after Gordon Moore, the co-founder of Intel, says that computing power doubles every two years. That’s an extraordinary, exponential rate of growth. Couple that with the convergence of IT and communications technology, and it’s not difficult to see the almost complete automation of accounting. The initial configuration of the software application may involve an accountant. The computer may ask an accountant (or someone else) to make a specific decision sometimes such as whether to write off a bad debt, and an accountant may have to establish the entries for business acquisitions and divestments, but that’s about it. Computers will just apply the business’s policies and the accounting standards to the transactions and produce reports automatically.

The stark choice facing all accountants is that they will be redundant unless they evolve. Soon, their future will be in using, not producing numbers, and building on their financial expertise to partner with business managers to produce better commercial outcomes. Managers need that help, but accountants must have the capabilities to provide it. Accountants must step up for their own and for their businesses’ sake.

Some accountants are already transforming de facto into Finance Business Partners (FBPs), but many of them are learning as they go without necessarily receiving the training they need to do a good job in their new roles, which at the very least make them less effective than they could be. Few accountants have transformed fully yet, and many or most have not even started. It’s not too late, but the best time to start your transformation is now.

The future is bright and exciting for those accountants who do transform into FBPs. Fulfilling and stimulating careers await those with the range of skills and expertise required. Others have done it; you can too. You have nothing to lose by trying, but plenty to lose if you don’t.

This book provides the basis and framework for accountants to transform themselves into Finance Business Partners, which takes practice and discipline. I hope you find it useful.

Malcolm Simister BA FCA

Melbourne, Australia

He who isn’t busy being born is busy dying. Bob Dylan, singer-songwriter.

CHAPTER 1

It’s Your Future, Your Choice, Your Career

‘When you are through changing, you are through.’ Bruce Barton, American author, executive, and politician.

• Sniff and Scurry

• Two scenarios for your career

• Why?

• Why do businesses want you, and what do they want you to do?

• What work?

• You can do it.

Sniff and Scurry

As time went on, Sniff and Scurry continued their routine. They arrived early each morning and sniffed and scratched and scurried around Cheese Station C, inspecting the area to see if there had been any changes from the day before. Then they would sit down to nibble on the cheese.

One morning they arrived at Cheese Station C and discovered there was no cheese.

They weren’t surprised. Since Sniff and Scurry had noticed the supply of cheese had been getting smaller every day, they were prepared for the inevitable and knew instinctively what to do.

They looked at each other, removed the running shoes they had tied together and hung conveniently around their necks, put them on their feet and laced them up.

The mice did not overanalyse things. And they were not burdened with many complex beliefs.

To the mice, the problem and the answer were both simple. The situation at Cheese Station C had changed. So, Sniff and Scurry decided to change.

They both looked out into the maze. Then Sniff lifted his nose, sniffed, and nodded to Scurry, who took off running through the maze, while Sniff followed as quickly as he could.

They were quickly off in search of New Cheese.

Later that same day, Hem and Haw arrived at Cheese Station C. They had not been paying attention to the small changes that had been taking place each day, so they took it for granted their Cheese would be there.

They were unprepared for what they found.

‘What! No Cheese? No Cheese?’ Hem yelled. He continued yelling, ‘No Cheese? No Cheese?’ as though if he shouted loud enough someone would put it back.

‘Who moved my Cheese?’ he hollered.

Finally, he put his hands on his hips, his face turned red, and he screamed at the top of his voice, ‘It’s not fair!’

From Who Moved My Cheese? By Dr Spencer Johnson. Quoted with kind permission.

Two scenarios for your career

You are an accountant in commerce, industry, government, not-for-profit, or in an accounting practice (I use the generic term ‘business’ for all these in this book). Think of two scenarios for your career:

Scenario 1: You do a good job crunching numbers, producing reports, and preparing tax returns, but your work is gradually being automated. One day, a lot more is automated, and much that remains is outsourced to some bright, capable, well-qualified accountants in India who are much cheaper than you. What you thought was going to be a satisfying, safe career with promotions, and pay increases turns out to be anything but. You then spend several months, or even a couple of years, looking for another job and become increasingly morose and disillusioned. When you qualified as an accountant after all that studying and hard work, it wasn’t meant to be like this. An accounting qualification was supposed to be a lifetime passport to success.

Scenario 2: You build on your accounting and finance knowledge and skills by enhancing your commercial and people skills and move into a commercially oriented Finance Business Partner (FBP) role. You use your financial expertise to help run the business and make a difference working with business managers on business issues. There is always something interesting happening, and senior people respect you and seek your opinion. It is stimulating and satisfying, and although you never seem to be quite on top of it and in control, it excites you not being quite sure what is going to happen next; there is never a dull moment. Then one day, someone taps you on the shoulder, and you move into an even more exciting role, perhaps as a general manager of a business unit or a chief operating officer role or perhaps in a different business. Then you progress to be the chief financial officer in a large business, and then, after a few years, you become the chief executive. When you started out, you thought you were going to be an accountant but have found that knowledge of accounting and finance was just an initial step in a highly rewarding, satisfying, and fulfilling career.

Now, which person would you rather be?

The future for accountants does not lie in crunching the numbers but in using them, not in counting the beans but in proactively helping to grow the beans.

This applies to accountants in practice too. The days are fast approaching when clients will no longer be prepared to pay much money to have you prepare their annual accounts and tax returns. You will have to do that for a much lower fee and faster, enabled by technology, even if you clients need you to do it at all given the automation that will be available to them. Clients will (already do) perceive much more value in someone providing them with good commercial analysis and advice about how to manage their businesses better. Perhaps smaller businesses, which can’t afford to employ their own Chief Financial Officer (CFO) or FBP, need outside help even more than large businesses. But that means that accountants in practice must radically overhaul their own businesses to be commercial rather than compliance oriented. Some are already doing so; all must follow.

Why?

In accountants’ new world, accounting, reporting, and tax work will be increasingly automated and outsourced to somewhere cheaper, similar to what has already happened to transaction processing.

Smart algorithms will eliminate most manual input in preparing the numbers and XBRL (Extensible Business Reporting Language, an internet-based reporting language) will automate their reporting. Account reconciliations will be automatic and continuous. Auditing will be continuous. Cloud computing makes it even easier to outsource not just transaction processing but also management, board, and annual reporting and tax planning and compliance.

For example, with the advance in computing and the convergence with communications technology your computer will automatically:

• Communicate with your bank’s computer to find out today’s exchange and interest rates, and apply them to the accounts.

• Communicate with your customers’ computers to ensure they will pay your sales invoices promptly, and if the business is disputing an invoice, automatically create a specific provision for a doubtful debt according to your business’s policies and flag it for someone to resolve the issue with the customer.

• Scan employee data and automatically forecast leave patterns and create appropriate leave provisions.

• Calculate provisions for all taxes.

• For the one remaining accountant in the whole organisation:

o Request any decision required (there will probably be some), so it can complete the accounting

o Provide at the end of every day a list of the things it has done and another of what it will do tomorrow to keep the accountant informed.

Not only that, but with the internationalisation of accounting standards Indian, Filipino, or African accountants can do much of the work the work that remains for humans to do and be happy to be paid far less for it. They can oversee your monthly and annual financial statements or, at the very least, the first draft. Teach them your country’s tax legislation and not just compliance, but even some tax planning can be done just as well in low cost countries as it can be in the USA, UK, Canada, Australia, New Zealand, or anywhere else, only a lot cheaper and overnight. There may be some cultural or communications issues to overcome, but it will and already is happening because the cost savings are significant and not just in accounting. An English friend is a partner in a medium-size law firm, which has most of its non-urgent typing done by one woman (there isn’t much left to do) on a remote Scottish island who does it at a time to suit herself and far cheaper than anyone would in mainland Britain. She could just as easily be an accountant taking some weight off your shoulders to allow you to concentrate on serving your clients or managers better.

So what is left for you to do? As far as traditional accounting and tax work is concerned, maybe not much, perhaps just polishing the final product, overseeing the process and fixing any issues. Your business will not need so many accountants, and the world will need fewer overall due to automation.

This will occur even if reporting requirements increase. In response to a faster world, reporting is becoming faster and more frequent. Managers need information daily that previously they only needed monthly. Reporting externally to shareholders will not only include more non-financial information in future but will become faster and more frequent. I predict that shareholders will demand to know the financial results of their company every month in future because the world is changing rapidly. Reporting to shareholders quarterly or every six months, as in Australia currently, will be far too inadequate. Businesses will need to automate their management and shareholder information.

In the not-too-distant future if you want to be an accountant, you had better be a really good one. It might be an exaggeration to reverse the famously bad prediction made in 1943 by Thomas John Watson, the former Chairman and CEO of IBM, that there would be a world market for maybe five computers (and many people) to there being a worldwide need for maybe five accountants (and many computers), but that is the gist of it.

The good news is that there is a role for those accountants who can transform themselves into value adding FBPs. Just as chief accountants have morphed into CFOs in the last two decades and are firmly in the ‘C’ suite adding commercial value, so businesses have realised that their other finance professionals can also do a lot more for the business, providing they broaden and enhance their skills, just as CFOs have done.

Why do businesses want you, and what do they want you to do?

The world is changing very fast, which means that business managers and directors need all the help they can get to run the business. You have or can acquire some important competencies they need.

It is said that 90 per cent of all the scientists who have ever lived are alive today, and many of them are engineers and technologists, who are inventing new things or new ways. They and others are developing communications technology, nanotechnology, biotechnology, robotics, digital technology, and, of course, information technology. The internet and mobile technology have made information available very cheaply, very quickly, almost everywhere.

These technological advances, social progression, politics, and more wealth generally is leading to attitudes changing, enabling uprisings against dictatorships, businesses’ reputations being trashed in minutes, women coming to the fore and young people, especially, having ideas they can implement to radically challenge and find better ways—think Uber and Airbnb.

Our natural world is changing too, be it climate change, mass extinctions (we are in the midst of the greatest period of species extinctions since the dinosaurs felt a disruptive impact 65 million years ago), or tsunamis. What will happen to Silicon Valley when (not if) the San Andreas Fault moves again, causing a massive earthquake?

For your business, depending on who you are, where you are, and your outlook, this disruption can be threatening, can create opportunities, or most likely both, but neither you nor any business can ignore it and survive.

This makes managing a business even more difficult than it used to be. Businesses must be highly agile, able to adapt quickly to changing circumstances. Managers and directors need help to do this and to recognise the changes that are occurring. At the same time, shareholders are demanding high returns. Decisions must be better, made faster, and implemented quickly and well. This is where you come in.

Business managers and directors need all the help they can get to make the right decisions and implement them quickly for the business to stay relevant. It is no longer adequate for business managers to make decisions based mostly on gut feel or without understanding their full financial implications. To make the best decisions quickly, they need you to challenge them. They need your:

• Rigour and honesty - grounding decisions in logic, data, and analysis and telling it like it is.

• Perspective – you see the world differently from sales and marketing, operations, logistics, research and development, and human resources and that perspective and linking it to the commercial and financial outcomes and expectations is very valuable.

• Opinion about what to do, what levers to pull to maximise the commercial outcomes in the short, medium and long terms.

Importantly, they need your input quickly because time is money as never before. So you must work fast and be agile, just as your business must if it is to thrive and even survive. You and the other people in your business are your business. The better the people, the better the business is likely to be, providing they work together cooperatively.

This means that sometimes you may be unpopular, telling business managers things they would rather not know, perhaps because of their vested interest in maintaining the status quo or because they just have change fatigue. This can make your job tough, but ultimately hopefully, they will recognise that your rigour and honesty is for the best for them and the business, and respect you for it. But this will also require diplomacy and your understanding of those people.

What work?

So what type of work awaits you? Well, how about working with business managers to:

• Find new markets and exit those that are no longer worthwhile.

• Calculate which customers are profitable and those which are not and to find more of the former and cease selling to the latter.

• Develop and implement a marketing campaign.

• Design and implement a news sales channel.

• Help negotiate a contract with a new customer or supplier.

• Help negotiate a new agreement with trade unions.

• Develop new strategies and business plans, and be responsible for some aspects of implementing them.

• Simplify operations to improve quality and reduce costs.

• Identify and implement cost savings.

• Help develop new products and services, and discontinue those that are no longer earning sufficient financial returns.

• Form an alliance with another business for a specific purpose and manage it.

• Review the impact of a new technology and decide whether and when to invest in it, which can be very tricky in fast-changing times.

• Review and change your business model to suit changed circumstances or to increase financial returns.

• Decide how to react to a sudden, unexpected event.

• Find new sources of finance (peer to peer?) or deal in a new electronic currency…

As well as some of the things you might be involved in already such as…

• Providing information more frequently, faster, and holistically.

• Managing key risks proactively.

• Outsourcing non-core processes and monitoring them.

• Implementing new business processes and systems on time and on budget.

While your financial skills may reserve you a seat at the table, continuing to occupy it and be involved in varied and interesting commercial work requires that you develop a range of other knowledge and skills.

You can do it

‘Whether you think you can or think you can’t, you’re right.’ Henry Ford, American industrialist.

The purpose of this book is to show you the knowledge and skills you need to transform from accountant to FBP and beyond, and how to do and get those stimulating commercial roles.

You can have an amazing career not by being an accountant, but by using your accounting and financial expertise, combined with other knowledge and a range of skills to improve commercial outcomes. It doesn’t matter where you are in your career, from freshly qualified accountant to seasoned professional. The best time to start on your new career is now.

To be able to provide the input that businesses need and that will propel your career to new heights, you need to build on your core financial skills to:

• Understand your business and industry, and stay in touch with developments (chapter 2). For accountants in practice, this means they may have to specialise in certain industries to be able to have the deep understanding required.

• Apply superior commercial acumen to identify, prove and sell commercial opportunities (chapter 3).

• Participate in managing business performance (chapter 4).

• Analyse proactively unexpected events, business initiatives, and business performances (chapters 5–8).

• Communicate your analysis quickly, clearly, and concisely in different ways to suit different managers, whether in writing or verbally (Appendices 1 and 2).

• Explain the accounts and finance in plain English (Appendix 3).

• Advise and partner with business managers (chapter 9).

• Implement business initiatives successfully (chapter 10).

• Make time to do all the above (chapter 11).

• Drive your career—it’s up to you (chapter 12).

Don’t be scared of all this; embrace it. You may as well because you have no choice. If you do, you can have a wonderfully fulfilling, satisfying, and stimulating career.

You can’t stop the waves, but you can learn how to surf. Jon Kabat-Zinn, Professor of Medicine Emeritus, University of Massachusetts Medical School.

One accountant who has done this is Chris Lynch, currently Chief Financial Officer and director of Rio Tinto PLC, one of the world’s largest mining companies based in London. He qualified as a Certified Practising Accountant in Australia and has worked for steel, aluminium, and mining companies in senior finance and management positions in several countries. For four years, he was the CEO of Transurban Limited, a large Australian-based infrastructure provider. I first noticed him in the late 1980s when he gained some profile in Australia for advocating the advantages of ‘Fast Close’ (producing monthly numbers quickly). He offered a video describing how he achieved his fast close to anyone interested, which was very innovative in those days. Chris has driven his own career as he progressed from management accountant into commercial roles and has clearly gone the extra mile. He didn’t complain if someone moved his cheese, but rather found new sources of cheese before the old ones ran out. He is an accountant who has had a highly satisfying and successful business career and is an example to all.

‘Your attitude, not your aptitude, will determine your altitude.’ Zig Ziglar, American author.

As the purpose of this book is to help you adapt to the exciting/terrifying but certainly disruptive new world. Each chapter includes practical tasks for you to do and to help you transform from accountant to FBP. To get the best value, do them as you read through the book. The first tasks are now.

Tasks:

• Think about your work and how much of it is likely to be automated within the next 5-10 years, assuming your business implements the latest releases of accounting and other applications promptly.

• Of what’s left of your work, how long will it take, how many accountants will it need?

• Based on this, how many accountants will your business be able to dispense with? Which ones will your business dispense with? Does this include you?

• Even if it does not include you, how will you be impacted?

CHAPTER 2

Understanding Your Business and Industry

‘Some men see things as they are and say why? I