Tag: accounting

Quote of the Week


Images-1INT. OFFICES OF WERTSHAFTER CPA & ASSOCIATES

TED SCHMIDT CPA, who has been fired by his boss for non-business use of the Internet on the job after 9 years with the firm, is about to leave the premises forever with his Mr. Coffee and a few personal effects in a box.

MR. WERSHAFTER

Schmidt?

TED

Yes, sir?

MR. WERSHAFTER

One more thing. Are you happy being an accountant?

TED

Happy?

MR. WERSHAFTER

Does balancing the books makes your heart beat faster?

Bummed out Ted takes a moment to contemplate the question. He sighs.

TED

No, sir, not really.

MR. WERSHAFTER

Then, I am doing you a favor. Next time find yourself something you have a passion for. Otherwise, you are just jerking yourself off.

QAF, Episode 2.2, written by Ron Cowen and Daniel Lipman

Anyone Can Be in Accounting?


There were times not long ago when in order to "work in Accounting"  you had to have some formal knowledge of, at the very least, bookkeeping principles.  When one dealt with manual cash receipts and disbursements journals, subsidiary and general ledgers, payroll transaction recording, at minimum she or he had to understand the principles of double-bookkeeping. 

The technological advancements and computerization changed all that.  Now, anyone who knows some Excel, quick enough to grasp menu-driven applications and doesn't suck at basic math is good enough to work in Accounting.

Don't get me wrong, I am a technology freak.  Some people who know me long enough say that Technology is my middle name.  Moreover, we, accountants, were some of the early beneficiaries of the computer coding: the first business data analysis compiler was written in 1957.  Truth be told handling all those books manually was getting out of control.

However, hiding all the double entries behind the computer's screen, allowed for the situation we currently have, especially in small business environment: people without any accounting and/or finance foundation are allowed to mechanically perform important functions. 

Here is a true story shared with me by one of my correspondent.  Let's call her Lisa.  When she took a CFO position in a law firm that employed over 500 people, the composition of her "Accounting & Finance" department was as follows: AP Manager (no accounting degree, 20 years of strictly AP experience), PR Manager (BS in General Business, prior experience in HR & Benefits), Staff Accountant 1 (BA in Psychology who was a daughter of a partner's friend), Staff Accountant 2 (BA in Child Psychology who started as a part-time office clerk when she was in HS and just stayed on), Financial Analyst (BS in Business Administration with above average Excel). 

Is it surprising that the firm had a turnover of Controllers and CFOs at the rate of 4 per year in the past few years?  They had great ideas what the company's record-keeping, analytical and reporting functions should be, but no one to whom to delegate the actual implementation.  Is it surprising that the company never had audited financial statements?

At the first meeting with the Staff Accountant 2 (let's call her Sam), Lisa was told that Sam was "an accounting genius."  Sam said, that she was so good at it, she got everything in a split second.  A week later Lisa has discovered that all Bank Accounts in the Asset section of GL had reversed entries: receipts as credits and disbursements as debits.  In other words, it replicated the bank statements instead of reflecting the company's transactions.

You think this law firm's accounting staff is unique?  Nope, it happens everywhere.  Look at the people responsible for financial functions in this young and hip company Quirky.  I am sure these four women are bright and wonderful, but none of them have neither accounting nor serious financial background. 

If this problem has affected you as well, please, do not hesitate to email me and share.

CFO’s and Controller’s Many Hats: Etiology of Afflication, Part II.


So, let's take a closer look at the reasons why CFO's and Controllers end up with more responsibilities and a larger hat collections than other members of senior managerial staff, and why we should be proud of it.

First of all, it's responsibility by association.  Human resources are related to payroll and that is a monetary subject and frequently the largest budgetary constrain.  Accounting modules usually outnumber all other types in the IT systems, hence we have vested interests in their adequate development.  Business strategies are fueled by cash flow, investments and lending.  It is frequently up to us to determine whether the business has an ability to expand or needs to contract immediately.  In other words, we are far closer to these issues than anyone else.  That is why in the businesses where products have dollar signs in front of them (such as assets management, or commodities trading), Operations end up to be under CFOs and Controllers as well.

Secondly, in the eyes of our bosses and peers, we are the natural choice to undertake any responsibility because we usually possess broader work expertise, eduction covering both fundamental and specialize knowledge, and far more diversified industry exposure.  A capable Controller with good commercial acumen and working knowledge of fundamental accounting   principles is able to apply them to any business model, whether it is manufacturing, import/export, consumer products, services, or E-Trade.  I frequently say that it makes no difference for me what to finance, safeguard ad record: tons of chemicals, gold futures, multimillion mortgage packages, women underwear, or paper clips.  On the other hand, try to transplant a VP of Marketing into home insurance after he has spent 10 years in cosmetics, and he will be lost.  And how many VP of Sales you have met who could understand a legal contract?

The third force comes from within.  It has to do with our tendency of relying only on ourselves.  yes, we complain about our hectic schedules and inability to relax, but if we didn't take these multitude of tasks under our control we would be worrying sick about things going wrong: strategic initiatives taken that we are not able to support financially, software packages bough that cannot reflect the commercial activities properly, contracts signed with terms paralyzing our cash flows, etc. etc.  And we need to be on top of everything, because every commercial happening needs to be translated into an accounting event and reflected in our books.  Face it, my fellow financial professionals, we would not want it any other way.

In the future, with your valuable input we will address the issues of multifunctional optimization and the way to avoid being crashed under the burden of responsibilities.