Understanding your accounting client (2 of 2)

Sorry about not blogging on Friday. Life has just been getting waaaay to busy lately!

Here is the 2nd installment of my conversation with John which appeared last Monday (see http://whatdoclientsreallywant.com/understanding-your-accounting-client-1-of-2/)

The core of the post last Monday was around the question that I posed to the accounting firm partner named John “what is the single most important aspect in serving clients?”

John’s answer was to really understand how their business operates from top to bottom.

I then asked John how he goes about understanding how his client’s business works. What John told me next blew my socks off! In all my years in working with the accounting profession and their clients I have NEVER heard this method of really understanding how a client’s business works.

Here was John’s method. He took a year off working as an accountant and worked in his client’s business. For a whole year! John determined that the only way that he was to fully understand his client’s business was to work in it full time.

At the time John had worked up a speciality in franchising – specifically the McDonald’s system. John had many clients who operated McDonald’s franchises. At his peak John was working with clients that operated over 80 franchises around Australia. John wanted to be the absolute “go to person” in Australia who had the right skill set and experience to provide the best possible business advice to any McDonalds franchise operator. How can he not given his above commitment.

John went on the training program and the follow up courses and did everything in the McDoanld’s store: from serving customers, to flipping burgers, cleaning toilets, cooking fries and taking out the garbage.

After his year, John HAD to be the only professional accountant in Australia at that time who can say hand on hear that I really understand your business to his McDonald’s franchise clients.

What a guy! Good on you John.

Until next time,

James E

 

Accountants being human!

Hi everyone!

I was going to post the 2nd part of understanding your accounting client but wanted to share a wonderful video clip of an audit team doing some interesting things in the UK. It is a great example of accountants being human. Clients like that. Click on the link below Enjoy!

Until next time,

James E

PwC Audit Song

Understanding your accounting client (1 of 2)

Recently I was meeting with a partner at one of my clients over a coffee. Although I had been working with this specific accounting firm for more than 2 years it was the first time we had met. As always to protect the innocent let’s call this chap John (as in John Wayne) rather than use his real name.

During the meeting we discussed the usual things about the market, clients and the accounting profession in general. John certainly knows his stuff – he has a great mix of skill and a deep and wide pool of experience from which to draw.

I asked John what is the single most important aspect in serving clients.

John didn’t need a long time to think about the answer … he replied in an instant, ” that’s easy James – to understand the clients business – to really understand how their business operates from top to bottom.

John’s answer was solid and predictable and of course absolutely right. I’ve heard it many times before. However, what happened next was real eye opener.

I asked John how he understands how his client’s business works. What John told me next blew my socks off! In all my years in working with the accounting profession and their clients I have NEVER heard this method of really understanding how a client’s business works.

Before sharing with you this method I need to emphasise the absolute importance of investing the time, energy and resources into understanding the business of your client. Leaving aside form-based compliance services, how can anyone advise a business in the right way if they don’t possess a strong understanding of how they operate?

I heard the other day something that struck a chord with me. It was a school teacher on a radio interview  talking about a mathematics. You can’t successfully solve an equation if you start with incorrect information or assumptions. If you start off on the wrong foot, the more you work on the equation the further and further you will move away from the right answer.

Tune into the next post to find our John’s method!

All my best,

James E

Be an accountant who is known for great communication (3 of 3)

The third hallmark of effective communication is the ability to ask good questions.

You would have heard me bang many times over the last year about one of my favorite maxims – “If you want a better answer … ask a better question … then listen”

Clients are impressed by accountants and advisors that ask questions they weren’t expecting or that they haven’t been asked before. It shows a preparedness on the part of the questioner that he/she invested time and effort in understanding the clients business and circumstances.

One of the best questions one can ask is “why?” If asked in the right way, the question of why can uncover a treasure trove of insights. There is a body of work that claims that asking “why” at least 3 times in the one meeting or conversation can uncover the root cause or motivation behind any aspect of business activity undertaken by people both internal and external to an organisation.

For example, a business owner may be asked the question, “Why are you in business?” The first response would most likely be “to make money” Further in the conversation, the business owner may then be asked “Why is it important to make money?” The next reply could be something along the lines, “so I can invest in my business” At a later point in the same meeting, the owner can then be asked, “why is investment important to you?” The answer may well be, “my core market is declining and I need to develop offering to new markets.”

By asking “why?” just 3 times the questioner has moved from making money to the business surviving. How interesting. The quality of advice that can be given based on the 3rd response rather than the initial 1st answer is chalk and cheese!

The above of course is an obtuse example but you get the idea!

Keep well,

James E.

Be an accountant who is known for great communication (2 of 3)

The second hallmark of effective communication is the ability to listen – really listen. In earlier posts you would have heard me bang on about the importance of listening when meeting and discussing issues with clients and pitching for new business.

I found an excellent list of barriers to effective listening and strategies to promote better listening.

Barriers to effective listening

There are many reasons as to why individuals fail to listen successfully, These include:

  1. Interrupting
  2. Faking attention and tuning out
  3. Becoming emotional
  4. Jumping to conclusions
  5. Getting distracted
  6. Pre-judging the subject
    Wrong focus
  7. Gathering only facts
  8. Inflexibility while listening
  9. Avoiding complicated subjects

Strategies to promote better listening

You can improve your listening skills by following some of the strategies mentioned below:

  • Maintain eye contact with the speaker.
  • Provide clues that you are actively involved in listening.
  • Focus on content, not delivery
  • Avoid emotional involvement
  • Avoid distractions
  • Refrain from formulating an immediate response
    Ask questions
  • Use the gap between the rate of speech.
  • Be willing to accept revisions
  • Choose the right environment
  • Stay active by asking questions for yourself

(Source: http://hubpages.com/hub/Importance-of-Listening-Skills-in-Professional-Life)

I remember my dad saying to me years ago … “God gave you two ears and one mouth for a very good reason … make sure you use them in the that ratio” It took me some time to work out that meant you should listen twice as much as you talk! Admittedly I was quite young at the time 🙂

Until next time.

James E

Be an accountant who is known for great communication (1 of 3)

What are the hallmarks that make a professional services provider like an accountant be an effective communicator?

As I see it there are 3.

The first hallmark is simplicity.

Have you ever been in a presentation or a meeting when someone insists on using long & complex words and phrases rather than simple and plain language? Of course you have! It’s as if they believe that they will impress people with their command of language by using words & jargon that show just how smart they are. Doing this helps no one.

I’d like to share with you a story. The moral of this story will give you a tremendous insight into how to more effectively communicate with your clients, prospects, staff, suppliers … in fact anyone you need to speak with and whom you want to understand the words you are using.

Many years ago I attended a student residential conference whilst at university. The conference was held in a wonderful bushland setting a couple of hours drive south of Sydney.

The keynote speaker was a terrific & engaging guy with the somewhat unusual name of Winkie Pratney (that is a name you don’t forget in a hurry ) He was sharing insights on leadership and value-driven work.

Winkie’s style of instruction/teaching was great. He peppered each seminar with real life examples and anecdotes. One such story has stuck in my mind since (25+ years!). Winkie called it the “3 Stages.” Here is how it went.

There are 3 stages in effective communication – be it written or oral.

Stage 1 – This consists of small ideas in small words. We all go through this stage. From our first acts of speech we use smalls words like da-da, mummy, bye-bye and eat to convey simple greetings and requests. As children grow & develop, the volume of words increase but not so much their length and the ideas behind them are still small … “Dad can I have $10 please?” I think you get the idea.

Stage 2 – This stage is big ideas in big words. This is the use (& sometimes overuse) of jargon and technical language. Have you had a meeting with an “average” tax lawyer lately? Tax legislation is typically complex, verbose and detailed. However, sometimes the interpretation or the explanation given by the tax lawyer is equally complex, verbose and detailed – a definite case of big ideas in big words.

Stage 3 – The 3rd and final stage in effective communication is simply this: you will never become a great communicator until you translate big ideas into small words.

To unpack this simple rule a little more, consider this. If a person knows and understands their subject matter extremely well then he/she should be able to explain the material to someone new to the area. For example, I have no understanding of physics whatsoever having done no study at either school or uni – it just doesn’t interest me for some reason. However, I once saw an interview with a Nobel Prize winning physicist on television explain in small words the big idea of Einsteins General Theory of Relativity. Not bad!

Conversely, if a person doesn’t know their subject matter that well they will tend to hide behind jargon or big words. Keep this in mind when listening to a politician speak about some so-called “complex issue.”

Here is a question for you – “When you communicate with your clients do you use small words or big words?”

See you next time,

James

Are you an accountant who asks the right questions?

Recently I was chatting with a CFO on the phone. To protect his identity innocent lets call him Robert as in Robert Redford (the slightly older version).

Robert is an accounting and finance professional with over 40 years experience. Over the last 15 years or so he has worked as a “gun for hire.” His speciality is to go into a business that is experiencing trouble and turn the place around.

Robert’s current assignment is as an interim CFO of a small to medium manufacturing company. This particular business has been in operation for 50+ years and employs over 100 people. For some reason, the business has been trading at a loss for the last 10 years. Robert, with a fresh set of eyes and some skill, within one year has turned around the business from a loss to a profit.

Now I know what you’re thinking … that’s easy James. Robert simply went in, sacked a lot of people, controlled some other costs and got the business to make money. No – it didn’t happen that way. Rather, Robert asked questions of people on the shop floor, middle management and of course of the owners. Through a combination of asking the right questions and some digging into the financial records, Robert was able to uncover a fundamental flaw. The flaw was both simple and destructive. Believe it or not – no one knew what margin the business made on the products they manufactured. Or put another way … that they didn’t really know what it cost them to produce their products. So how on earth can they make a profit when they didn’t know the cost of what they were making.

In my phone chat with Robert he told me that, armed with the above knowledge, it was a relatively straightforward process to make the necessary adjustments to get the business back to profit. A success story!

However, it was Robert’s next comment that caught my ear the most. He noted, with some frustration and amazement, the fact that that the external auditors and accountants that this business had been using over the last 10 years (trading at a loss every one of those years) weren’t proactive enough to at least ask the question “Why the loss was occurring year after year?” As Robert said to me, “It just reinforces the stereotypes of accounting firms and their people – they look through the review mirror and don’t come up with ideas to tangibly help their clients. They are more focused on ticking forms about the past and making lodgement deadlines. Its very sad – 10 years of missed opportunities.

Now compliance is important, but clients see it as a necessary evil – not as something that helps their business. Lets face facts, the majority of compliance services are simply commodities. The now and the future for the profession lies in advisory work which helps businesses make more money, save more money or save time.

Until next time,

James

Reese – an example of of an almost great accountant (2 of 2)

In the last post you’ll remember reading about Reese – our highly skilled accounting professional who lacked a network and needed to learn how to sell.

As a self-employed headhunter, the way I feed my family is through the network of contacts and relationships I have built and maintained over many years. In the case of Reese she has worked for the same accounting firm for most of her professional career and has only really built a network internal to the firm. If Reese aspires to be a Partner she will need to start building relationships that (sooner or later) will help her attract new businesses or more business from existing clients. So how does Reese get networking? Given the readership of this blog I will assume a few things so we can get to the heart of the matter.

1. Choose your area.You can’t be all things to all people. If your professional interest lies in say, the biotechnology field, then focus on relationships in that arena and around it.

2. Serve that area. Once you have selected the area start serving. By this I mean get involved in all the associations/forums/groups you can that make up your chosen area. Getting involved means not simply joining but doing things for and with others, e.g. give free advice, volunteer help, sit on steering groups/committees, make speeches and the like. Get to be known as someone who helps others – no strings attached.

3. Build a reputation as a “go to” person. Closely linked to the above point is the building of a profile as the person who becomes the hub for activity. Like a hub of a bicycle wheel that connects the spokes be the person that can link others together. Through a simple introduction over a coffee much kudos and creditability can be and is created. You will find that the hub becomes involved in all sorts of interesting situations and conversations that will lead to new opportunities.

4. Be genuine. If you are getting involved and helping others for the sole purpose of getting business and making sales you will fail. People can see a phony a mile away. So don’t be one!

The above points are not just useful for our young friend Reese to think about; they are a good reminder to the seasoned professional services campaigner!

All my best,

James E

Reese – an example of of an almost great accountant (1 of 2)

Recently  I met a potential job candidate on behalf of a client of mine. Lets call her Reese as in Reese Witherspoon .

Reese was a lovely lady in her early 30′s. Bright, warm and friendly. After the first five minutes of our coffee meeting I felt I had known her for years.

Reese is a senior accountant with a highly technical background and a wonderful skill-set in problem solving and working on complex projects with big end of town clients. In addition, she has a passion and enthusiasm for her work that is contagious. I think it would be safe to say that there would probably be around a couple of hundred professionals with her particular skill-mix in Australia. I’m not joking … she is that good! This coupled with her engaging personality makes for a formidable combination.

At first glance she seems to have all the makings of a first rate professional. But there is something  missing – her ability to network and sell.

To date Reese has focused on honing her technical & professional skills to the detriment of her capability to build effective relationships both within and outside her accounting firm. In fact during our coffee Reese clearly stated that it was only in the last year or so that she had come to realise how vitally important “networking” is.

As I think I’ve said in past posts I hate the word networking.  The word has unfortunately come to represent the attitude and behavior of  “what can I get out of other people.” I don’t want to sound twee about it, but true networking is about meaningful relationships. In Reese’s case she has not spent the time to identify, establish and cultivate relationships in the wider community. For it is these relationships with others that will help her on her way to building new business contacts and deepen her bonds with existing clients.

Reese is not yet a Partner in her firm. If she wants to not only be a Partner, but an effective, one she needs to learn how to build relationships and sell her services. Her passion for the profession is (sadly) not enough.

So how can Reese do this? Tune into the next post!

All my best,

James

Who keeps an eye on the auditors? (2 of 2)

Following on from the last post, here is another extract from the Radio National Background Briefing segment. It makes for great reading!

Former accountant and auditor who writes the accountancy watchdog column at Forbes Magazine, Francine McKenna.

Francine McKenna: The four largest firms-Deloitte, PwC (PricewaterhouseCoopers), Ernst & Young, and KPMG-they probably earn more than 100, 120 billion dollars worldwide. It’s a very large industry, just those four firms. And they employ worldwide hundreds of thousands of people.

Those numbers are made up of lots and lots of individual firms at the country level. So you have very large countries like Australia, like the United States, like the UK, like Germany, Japan, China, et cetera, where the firms may be very, very large and employ a lot of people and the revenues are very large, too. And it all gets added up together. However, each firm in a country is a private partnership, it’s a separate legal entity, it operates independently, and the firms, country-by-country, operate together under a brand name, like PricewaterhouseCoopers or like Deloitte and KPMG.

Stan Correy: Francine McKenna is making an important legal point about the big four audit firms. While, for example, KPMG China or Australia may have the same brand name, they’re separate entities. So if there are problems in KPMG China, that doesn’t mean KPMG Australia is to blame. And, as Francine McKenna explains, the ‘Big Four’ are past masters at avoiding blame.

Francine McKenna: We often say you can bring the auditors to court, but you rarely bring them to justice. First of all, they don’t go to jail because to go to jail they would have to be proved part of a fraud, complicit, then you would have to have the smoking gun, which doesn’t happen because the auditors don’t tell on each other-there’s sort of like the mafia, there’s this omerta-they never, never, never tell on each other.

Stan Correy: Nevertheless, with all this apparent incompetence, hiding behind complexity, and being too close to the people they’re supposed to be independently auditing, when are the audit firms liable? Francine McKenna says it’s tricky.

Francine McKenna: The other thing is that, you know, hardly anybody goes to jail. We have this, you know, ongoing debate now about how nobody is going to jail over the financial crisis and the auditors are at the bottom of the list in terms of people that anyone thinks deserve to go to jail about anything.

Stan Correy: Most big auditors have insurance against making mistakes and their good brand name is important to them, so they get the big clients. So they hate bad publicity and have a lot of defences ready. All this is being played out in a high profile case in Australia.

Journalist [archival]: Local stocks have tumbled three and a half per cent to a three month closing low, after retail property trust Centro announced it’s struggling to refinance $1.3 billion in debt…

Stan Correy: In late 2007, the shares of shopping centre owner Centro Properties Group collapsed after the company admitted it released misleading accounts to the market. The corporate legal drama involving Centro Properties Group then began, as investors who lost money wanted revenge. The drama involves management, directors, and auditors.

So, who was to blame for allowing the misleading accounts to be released? Well, two years ago, ASIC, the Australian securities regulator, brought proceedings against the directors on the board of Centro Properties Group and two managers, claiming they had breached their duties and had misled investors. In late June this year, ASIC had one of its rare legal victories.

ABC Newsreader [archival]: The federal court today raised the bar of responsibility for company directors. The court has ruled that directors of the giant property group Centro breached their duties by not picking up billions of dollars in errors in the accounts. In 2007, the directors approved the accounts, which showed the company had no short-term debt, understating the situation by about $3 billion.

Greg Medcraft [archival]: It’s a landmark decision in Australian corporate governance. I think it does send a very clear message to boardrooms across the country about corporate accountability.

Stan Correy: Greg Medcraft, the chairman of ASIC.

Justice Middleton rejected the directors’ argument that they relied on the expertise of outside auditors who had approved the accounts. But the Centro saga doesn’t end with the ASIC case. The directors of Centro are in turn suing the auditors, PricewaterhouseCoopers, and so are the people who lost their money in the Centro crash. There are two class actions against Centro and PricewaterhouseCoopers by investors-one by law firm Slater & Gordon, the other by Maurice Blackburn.

From Maurice Blackburn, senior associate, Martin Hyde.

Martin Hyde: Centro has brought cross-claims against its auditors. Centro said that if shareholders have lost money as a result of what went on it was partly or completely the fault of the auditors, PricewaterhouseCoopers. And so Centro and PricewaterhouseCoopers will fight it out and have to prove up the elements of their cross-claims at the hearing next March in the same way that we will have to prove up the elements of our case.

Stan Correy: It’s important to repeat what Martin Hyde just said. There are Centro investors suing Centro Properties and its auditors, PricewaterhouseCoopers. Centro Properties also has a claim against PricewaterhouseCoopers, its former auditor. And PricewaterhouseCoopers, in a cross-claim, is saying that the individual directors of Centro Properties and Centro executives misled the auditors. It’ll be QCs at ten paces for months.

Last June, Justice Middleton found that the Centro directors had failed in their duties when they approved the faulty 2007 accounts. The penalties will be handed down soon. ASIC wants the full punishment: fines and banned from holding office as directors. But Justice Middleton, while finding the directors ultimately guilty, wasn’t kind about the auditors either. He said there was evidence that the auditors didn’t understand the new accounting standards and that they didn’t inform the audit committee of a more than $1 billion error in the accounts.

Justice Middleton’s decision, according to Martin Hyde, reinforces the investors’ case against the auditors.

Martin Hyde: In one sense we still have to prove our case, and that hasn’t changed, but there are some aspects of the decision that may be helpful to us, and also if the judge goes on to make declarations about what happened, they are also potentially useful.

Stan Correy: So could you just give a summary of what your class action case is?

Martin Hyde: The Maurice Blackburn class action involves a range of investors, from the biggest institutions in the country right down to mum and dad shareholders, who lost money in Centro during the course of 2007. And we allege that the company and also the auditors engaged in misleading and deceptive conduct and also breached corporations law, and as a result our clients lost money.

Stan Correy: Martin Hyde from Maurice Blackburn.

The Centro case was widely reported in the international media, and at Forbes Magazine, Francine McKenna wrote a story on the judgement for her column.

Francine McKenna: I think it’s a very interesting decision; one, because the judge took such a very adamant position with regard to the directors’ responsibility and the clear direction that they could not abdicate responsibility to a third party advisor like an auditor. And that is the ready excuse that many executives and directors here in the United States use; in fact, our own US Attorney in Manhattan, I quoted him from an article, saying that we have a difficult time here prosecuting fraud cases, because executives say the auditor said it was OK, and the auditors say, ‘Our client gave us false documents,’ and so who am I to believe?

Stan Correy: In the recent ASIC case, the judge found that the directors couldn’t just delegate financial decision-making to the auditors. But PricewaterhouseCoopers, according to Francine McKenna, still has some explaining to do about their role.

Francine McKenna: And I think it’s going to be interesting to see what happens if PwC can also find a way to explain the fact that they didn’t stand up and do their job, I think, to communicate this information to the board of directors and not to let internal executives sort of paper over it and perhaps obfuscate the information from the directors themselves.

It’s a very interesting case both from the director and auditor perspective.

See you next post for something entirely different!

Keep well,

James E