Its a New Year!

Hi everyone. Sorry … I meant to start blogging earlier than this. But a lot of things got in the way – not the least being my day job!

We’ve got lots to talk about in coming posts.

Over the Christmas & New Year I did a lot of thinking and reading and some more thinking about things regarding the accounting profession & the markets in which accountants and their firms operate.

I was in a meeting the other day with a client of mine. We we’re taking about the importance of the firm’s partners, managers & staff communicating effectively with their clients, prospects and amongst themselves. After the meeting I was reflecting on the more impressive professionals I’ve met over the years – be they accountants, lawyers, management consultants, corporate advisers or financial planners.

Over the next 3 posts I’m going to be sharing with you some of the hallmarks of what makes a professional an effective communicator.

Don’t miss it!

James E

What a CFO looks for in an accounting firm

Murray Walton, CFO of IDP Education, an organisation placing international students into higher education within Australia, shares what he looks for when wanting to hire a new accounting firms.

Set against the background of our recent request for tender, along with receiving each firm’s written proposal, I wanted to make sure I eyeballed the people involved. Each firm came in and spoke to me three or four times before the presentation to the audit and risk committee. I wanted to put them in the best possible position with the committee so they could convey clearly the benefits and style of their services, so we had a dry run so to speak. They would each give their presentation and then I would highlight certain items, “OK, this is the situation: we’ve got a material difference on a signifi cant item. You and I don’t agree. How are you going to communicate that to the committee? How are you going to communicate to the audit team who’s sitting next to me? Are you going straight to him or are you going to come and work with me? How does your process work?”
This process was valuable. Poking each firm like that showed real differences in
their style, content and cultural fit with our business. It was really interesting. What
I’m really looking for in the final analysis is how they communicate and how their
process works when they end up in a difference of view with me as the CFO.
An interesting approach.

What were some of the items on your scoring sheet used to assess each firm?

We looked at things like communication style, cultural profile, demonstrated experience
and expertise, strategies and infrastructure to deliver the external audit services, quality processes, audit team composition, the audit fee, firm independence, international
delivery capacity, how they would handle matters of material significance, and what other non-audit services they would be able to provide.
With this last item, I’m not talking about tax and advisory but rather what things would they be able bring to the table that they are not necessarily going to charge us for … things
like thought leadership, executive networks, training and updates, and the like. We also looked at how they communicated with the audit committee and the management team, their transition plan from our audit existing firm and then finally, how we felt about their presentation.

 

Not adding value

Jim Kondonis is the CFO of Lowes Manhattan. Read Jim’s answer to the question, Tell me about a time when you received terrible service from an accounting firm.
How did it make you feel? What could they have done differently?

I won’t call it a terrible service; I’d rather call this a service that didn’t add value. It was
in a past life of mine. I was working with a Big Four accounting firm and we were using
them as an adviser on a particular acquisition we were working on.
The company that I was involved with was looking at a major acquisition. We decided we’d outsource the due diligence process and obviously involve our accounting partner in the deal. To cut a long story short, it cost us a lot of money for very little value. What happened was that the deal fell over at the 11th hour and we had a big bill to pay.
In fact, the owner of the business I was working with had to negotiate the big bill down to $300,000. At the end of the day, the due diligence process failed because certain parts of the sales contract were not relayed back to the business owner. If they were communicated early on in the piece, we probably would have saved a lot of money, since the deal would have not proceeded, very early in the due diligence process. It came down to the fact that the accounting firm didn’t really understand the operations of the business that they were involved with and didn’t understand the needs of our business. If they understood the needs, then looking at the sale contract, they would have picked up this anomaly in the contract and known for sure that it just wouldn’t have worked for the business.

They didn’t pick up this contract anomaly? It wasn’t discussed at all?

No, until right at the 11th hour when they said, ”Oh, and by the way, in the contract,
there’s this and this, and you can’t use the brand without the permission of the current
owners”. If they really understood how a retail operation worked, then they would
have known that this condition just couldn’t fl y. The whole deal would have been
sidelined in the first couple of weeks. We would have saved a huge amount of time,
effort and expense.

What could they (i.e. the accounting firm) have done differently?

They should have read the sales contract thoroughly. If they didn’t have the skills to
review the contract then they should have said something or recommended another
adviser to us. Their due diligence seemed to focus only on the numbers side and didn’t
take into account the commercial implications of the contract.

The Australian Rugby Union

Here are some thoughts from Ashley Selwood, CFO, Australian Rugby Union in response to the question: What is the most important quality or attribute you look for in an accountant?

The times that we’ve engaged an external accountant have been mainly around projects. We’ve tended to engage accountants and others for project-type work, so they’d come in to complete a specific task. There has been some advice from time to time on tax issues, but we’re a not-for-profi t, so although we don’t pay tax we still have tax issues. We’ve still got fringe benefits, GST and the like. My comments are around where we’ve engaged accountants on the basis of projects.

Set against this background, one of the attributes I’d look for is the ability for the person (or persons) to sit down and spend the time up-front getting to know our business. In my experience, many accountants use predefined work processes, templates, checklists, software and so on. This is good and helps in a lot of business settings such as audit
assignments.
However, I find at times that external accountants already have some preconceived ideas about what the solution is before they spend the time to actually get to know our business. We’re a sport and nine out of 10 people who walk in the door are either followers
of rugby or at the very least know a bit about rugby. When you’re dealing with sport there’s a lot more heart than head involved and sometimes people will walk in the door as a consultant or an accountant and the first thing they’ll do is spend an hour telling you what’s wrong with the Wallabies! Once you get through that, they always seem to have quite fixed ideas of what the solutions are without actually spending the time to get to know our business. In my view this is a fundamental mistake. It not only applies to accountants but all other external professional consultants, irrespective of their discipline.

With sport, people understand it or think they do. What they don’t understand is the business of sport, which is why we are engaging them in the fi rst place. The challenge, in our case, is that the core of our business is run on six Saturday nights during the year. We play six test matches annually against countries from around the world and we drive all our revenue for the year from those six matches.
When you’re sitting down and talking to an accountant and looking at what attributes you want them to have, you want them to set aside their preconceived ideas and get to really know what our business is about before they start, and get into the process of providing the advice or whatever the work they need to do.

I have an example – it wasn’t with an accountant but with a consultant – where we were three meetings into the work when something came up and I started to explain a little bit more about our business, and this person, who was taking copious notes, actually admitted after the end the meeting, “I wish I had known that earlier”.
We were already three meetings into the work and when I started explaining some of these things that they didn’t realise – like six Saturday nights; we deal in six currencies every day; all that sort of stuff – they didn’t know that because they hadn’t spent the time up-front to get to know the business. They’d walked in, they had their template, they thought they knew all about rugby. Needless to say, I was not impressed with how they ran the project.