The old-fashioned way

Thirty years ago, when one spoke about “accounting” or “bookkeeping”, they referred to the accumulation of data into books of account, and the balancing of those books of account. The most important aspect of that data collection process was that “the books balanced”. Every cent had to be accounted for.

In those days, business decisions were not made with light-speed, as they are today. A major acquisition, or a change in emphasis, would take ages to finalise. Change was not always even that necessary because the factors which drive markets, today, were not evident then. In addition, the constraints faced by many modern businesses were never considered or even imagined in those days.

Thirty years ago, the prevalence of “small” business was nothing like it is today. My father and his father’s generation were content to work for large companies, or for the government, because of so-called ‘job-security’. Entrepreneurship was not that necessary. Today, more than eighty percent of working people work for ‘small’ business. More people are self-employed today, than those employed by others! And more and more people find themselves having to start up small business just to survive! Technology has also made it possible for relatively unskilled people to do most of the work previously done by bookkeepers and accountants.

{slide=The role of the accountant has therefore changed quite significantly.}

Instead of just ensuring that historic data is carefully packaged and allocated to the correct expense accounts, or that it complies with generally accepted accounting practice (although this still needs to be done!), accounting practitioners need to adopt a more pro-active, “prophetic” viewpoint.

Data must become information, and the information must turn into ‘road-signs’ to keep businesses on track, focused and envisioned. Accountants need to become “business doctors” – involved, as it were, with the ‘health’ of a business. Even more so, small business today requires that accountants adopt a ‘preventative healthcare’ attitude – more concerned with ensuring that business not only survives, but flourishes. While ‘financial’ accounting is still necessary to comply with legislation and generally accepted practice, ‘management’ accounting is of far greater importance.

Preventative Healthcare for Business

This is how I see our role as a service to small business! Access to key information can mean the difference between success and failure. What I am talking about here is monitoring the financial health of your business.

To take the ‘health’ analogy a bit further, thirty to forty years ago, we relied on doctors to diagnose and prescribe a regimen once we were already sick.

Nowadays, the emphasis is on preventative health care – adopting a healthy lifestyle to ensure that the doctor is never needed. This preventative health-care lifestyle is also necessary to negate the effects of spiraling medical costs. As a result, individuals have had to become more, and better informed about ways and means of changing, and sticking to, a healthier lifestyle. This has led to the prevalence of books and magazines devoted to the promotion of this lifestyle. You can get books on herbs, vitamin supplements, exercise, organic foods and even emotional and spiritual upliftment. We no longer need to take every cough to the doctor because we generally know how to deal with it ourselves.

Thirty to forty years ago, businesses were not faced with the monetary and time pressures now being experienced. Only large businesses employed financial managers. Bookkeepers were employed to keep accurate records and once a year, a professional accountant would be given these records to turn them into a set of statutory financial statements for submission to the Receiver of Revenue. If a business found itself in trouble (once it was already sick!) the accountant would be consulted for financial advice. Nowadays, the financial health of a business needs to be designed around this concept of “prevention is better than cure”.

So, business owners need to become better educated on the ways and means of adopting a healthier business lifestyle. That means adopting a daily lifestyle regimen that monitors the pulse and lifeblood of the business. It cannot be done in the same way it was done thirty to forty years ago. Just as medical costs today can be extremely high, so too can the cost of financial management expertise – especially if the business is already in trouble!

There is also another aspect to this analogy.

Thirty to forty years ago, doctors made house calls. I can remember our family doctor. He attended to my grandparents, my parents and he had even delivered me and my two brothers. He knew where the apples were kept in the fridge and would help himself to a cup of tea on each visit – and quite often he arrived without being called. He knew the kind of food we ate, the amount of exercise we did. So, – when something did go wrong and someone did get seriously ill, he already knew the background and had a real ‘feel’ for the situation. Nowadays, doctors don’t do house calls unless it’s an emergency. Doctors don’t really know how we live our lives from day-to-day, and most don’t even really know where we live, and it probably wouldn’t be too important if they did! When we do get to see them for something serious, they will generally go through a diagnostic process and then prescribe medication. It’s then up to us – take the medication and if it doesn’t work, get back to them.

Now, I’m not trying to knock the medical profession – they are part of the modern-day malady that afflicts all of us – too many things to do and not enough time.

Professional accountants and financial management consultants today also do not make “house calls”! The cost of maintaining their consultancies is extremely high because they have to employ the services of highly qualified and skilled practitioners. When a business gets into trouble, they are often called in to help. They then have to go through a diagnostic procedure to determine the cause of the problem and then prescribe a course of treatment. It’s been my experience that when businesses are in distress the problems are very often not that easy to pin-point immediately. As a result, it is again a case of ‘take the medication and if it doesn’t work, get back to them’. In reality, Doctors and Accountants that are not routinely involved in the day-to-day affairs of their patients/clients cannot be expected to get things right first time, every time.

At FINSERV, we have decided to adopt the “house calls” approach to our clients. It gives us an insight into daily employment and management practice, we get to know our client’s employees, his customers and even his suppliers. We like to do this physically, and in a practical way, but sometimes its not possible because clients are too far a way. Thanks to the Internet, this has now changed, and we can build a cyber-relationship that, while not as effective, still allows us to have a good idea of what a business is all about! We know where the client lives and how he lives. We analyse monthly management financial statements prepared by our clients under our guidance and interpret them into key performance indicators. It helps us to adopt a more holistic approach to the financial management of the business.

It is, we believe, preventative health care for businesses!

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