Far from being confined to the back office, many businesses now expect their accountants to behave like investigative journalists by providing prompt, proactive analysis of an issue, then to participate in decision-making.
Given that analysis should inform decision-making and decisions increasingly have to be made rapidly, analysis is also needed right now, or sooner just like a story for a newspaper deadline.
Unfortunately, the traditional analysis method used by accountants of waiting for the monthly results, then ascertaining reasons for actual or budget variances, is of limited use because it:
- Is far too late business managers may have already found and fixed a problem without any finance input or the problem may have become much worse since the variance first appeared
- Is inefficient it can be difficult for busy managers to recall events that may have happened a few weeks ago
- Gives insufficient time to write the analysis it is often written hastily and, as a result, poorly
- Encourages accountants to write the analysis from a finance rather than business perspective, making it more difficult for managers to comprehend
- Worst of all, gives finance a poor reputation as it contributes little value to the business
So what should accountants do? To answer that, it is necessary to understand what managers want. One divisional general manager of a A$1 billion turnover services business explained that she wanted analysis that:
- Explains what has happened and why the past. The “why” must also get to the fundamental reason. For example, analysis explaining that profit is below budget because of excessive overtime being worked is not much use unless it also describes the underlying reason for the overtime.
- Interprets the implications of what has happened the future. For example, whether the event and the overtime will continue and, if so, for how long and what the total cost is expected to be.
- Recommends the decision to make, perhaps also describing other options. This does not have to be the accountant’s recommendation alone, but may include those of the accountant and relevant business manager(s). With the accountant’s involvement the recommendation will, hopefully, have more rigour.
Some business managers, although agreeing with the above, say it is often not their accountants who are able to provide such analysis. Clearly, some areas of business are quite specialised and in such situations it can be best for business managers to seek out one with particular expertise in the area in question. Generally, however, for an accountant to understand a business and industry you need to know about current developments in a whole range of areas, such as what your customers, suppliers and competitors are up to, the technology used in the sector and how it is changing, plus any relevant political debates occurring, both domestically and internationally.
Crucially, you must be able to speak the business language the language of your audience.
What’s the best source for this information? People. Obviously it is important to read quality newspapers and appropriate journals, but speaking to people both formally and informally will not only help you to stay in touch, it will also help you to build important relationships with business managers.
Journalists do this well. They develop and maintain relationships with sources who can provide useful information when something significant happens. Journalists don’t have to be expert themselves, nor do accountants in the particular business, the managers are experts but journalists and accountants do have to have a broad enough knowledge to understand what has happened and any business implications.
For accountants, attending formal business managers’ meetings is important as it shows that you are part of the team and enables contribution to decision-making, but informal meetings are important, too. Indeed, it is in a social environment that managers may disclose feelings and fears far more readily than in a formal meeting.
Having managers’ trust is crucial. Respecting confidences, helping them out of a difficult situation without compromising your integrity and helping them to make more rigorous decisions while displaying your financial expertise are all ways to develop that trust.
Sound knowledge about the business and industry and staying in touch enables you to find out about, then analyse, events as they occur. Your analysis must be concise, clear and written quickly core skills for journalists.
Then, when it comes time to analyse and report on the monthly results, you have all the information you need and much of the analysis is already written.
Three important rules of thumb when writing analysis are:
- No more than 35 words in the opening paragraph, which must set the scene and sound interesting enough for people to want to read the analysis.
- Always write in the active voice, unless criticising someone. In the active voice the order of the words is: subject, verb, object. For example, The cat sat on the mat, rather than the passive voice which reverses that order: The mat was sat on by the cat. The active voice uses fewer words and also flows more smoothly, so it is easier to read.
- Write from a business rather than finance perspective, which is easier for business managers to comprehend and also tends to make you write in the active voice, such as: “This business event resulted in this financial outcome”, rather than, “This financial outcome was caused by this business event”.
Accountants who understand their business and industry, have good relationships with business managers and can write well get noticed. A course in journalism might be just the thing to boost your career.
Malcolm Simister will facilitate CPA Australia workshops on “Analysing Business Proactively” in September and October. Search cpaaustralia.com.au/training for details.
This article is from the September 2012 issue of INTHEBLACK magazine.