Authored by: Zobuzwe Ngobese, Marketing and Communications Executive at the South African Institute of Professional Accountants (SAIPA)
While technology products are emerging to help automate the financial year end, it remains largely a manual process. This makes it one of the most labour intensive periods the professional accountant will face during the year.
But the work doesn’t stop when the books are closed. Rather, it sets the stage for the preparation of their company’s integrated reports or, for smaller concerns, a set of financial statements that highlight the performance of the business. Yet, even this doesn’t scratch the surface of the value the modern accountant is expect to add. Rather, it signals that the real work is about to begin.
While other executives understand the siloed information generated by their own departments, a professional accountant, like the financial director, is exposed to their organisation’s full spectrum of data. This makes them the main strategic advisor for their company, who understands the interplay between various business activities and the cross-cutting concerns.
Yes, previous year performance is important, but their focus must shift to how sustainable the company will be in the future. Professional accountants should not only assist their business leaders to determine this sustainability. Where it’s lacking, they can also help develop strategic direction and action plans to achieve greater confidence in the organisation’s endurance.
The purpose of a business is to grow, and robust financials may encourage overly enthusiastic expansion. However, both timing and situational awareness are vital, and these are sixth senses the professional accountant must possess in spades.
In 2018, British media reported that Jamie’s Italian, a UK restaurant chain launched by famed chef Jamie Oliver, had hit hard times. After rapidly expanding to 43 outlets, based on Oliver’s reputation, the business, as he puts it, “simply ran out of cash.” With only hours to spare before bankruptcy, the chain was saved by a cash injection of 13 million pounds from Oliver’s own funds. But the episode led to the closure of 12 restaurants and the loss of 200 jobs. Yet, many other restaurants also closed around the same time, mainly due to nationwide rent increases and other economic factors. And Oliver himself admits that around 40% of his businesses have failed, some after years in operation.
These and other cases in the media illustrate how important it is for the professional accountant to be cognisant not only of their own financials but the macroeconomic forces at play as well. They must apply prudence, backed by astute financial analysis, to every business initiative and guide their CEO along a sensible growth path.
Sometimes, the year end results confirm the story no one wants to hear - the business is failing. Once, this meant almost certain bankruptcy. However, the Companies Act of 2008 introduced a provision for business rescue by which an ailing company can be placed under the supervision of a recognised business rescue practitioner. Any claims against the company are temporarily put on hold, provided an approved business rescue plan is implemented.
Accountants who are certified as business rescue practitioners, usually through a professional body like the South African Institute of Professional Accountants (SAIPA), can turn such businesses around and steer them back to profitability so their next year end is much more positive.
Preservation of earnings
An often overlooked aspect of accounting is capital management. Even admirable retained earnings can be devalued by a poor economy. It is the job of the professional accountant, again in the form of the financial manager or director, to invest post-year-end funds wisely. Should they remain in the bank at a nominal rate of interest, be invested in the stock market at risk, or be used to buy new equipment that may or may not improve production and provide an excellent return on investment? The available options are unlimited but the opportunity costs could go either way. Making the right call is a skill that every accountant must strive for.
Automating the year end function
As mentioned, products are being introduced to automate the year end function. Although complete automation is not yet possible, accountants should look for ways to hand off repetitive, low-skill activities to robotic process automation (RPA) or other data processing and decision making technologies. This will give them more time to focus on high-value services that can help their organisations grow and thrive.
As the designer of their company’s accounting systems, the accountant, not the IT department, is responsible for the implementation of automated functions. They must therefore gain a good understanding of AI, RPA, data analytics and related technologies.
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