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The Life Cycle of an Accounting Function

By Mark Birchall FCCA on 05/05/2017 - 0 Comments

I have come across examples where the business owners do not know or understand the background, qualifications of an accountant or the structure they require for a finance team. This is a key issue when you have a growing business. The resources you had a few years ago may have served you well. However, the business may have gone through a tipping point requiring the business owner to upskill the finance section. Would you know what MAAT, FMAAT, ACA, FCA, CIMA, FCIMA, ACCA, FCCA, or CIPFA mean when presented on a CV or business card. Are these merely funny letters that you know mean something? This article will help you understand the lingo and place you in a better position when talking to accountants generally.

What the letters mean.
Any letters quoted after a person name means they have undertaken some form of formal assessment illustrating the individual has invested time and money passing exams. The qualifications range from studying the association of accounting technicians (levels 1 to 4) through to a chartered association status. Usually after 5 years the association awards fellow membership status based on practical post qualifying experience.

The five bodies of accountants being:
MAAT = member of the Association of Accounting Technicians (AAT), (but not chartered).
ACA = Qualified Chartered Accountant.
CIMA = Chartered Institute of Management Accountants.
ACCA = Association of Chartered and Certified Accountants.
CIPFA = Chartered Institute of Public Finance & Accounting.

As a business owner, which do I go for?
As your business grows, you may decide to appoint a book keeper (like MAAT), outsource to a qualified accountant using a service company or recruit in house so you have their expertise at your fingertips. The decision depends upon several factors facing the owner and the rapidly changing technology market for finance systems.  A good indication of your requirement is the turnover, profit and cashflow demands. What is the impact on your TIME, do you have an effective TEAM?  Who is looking after the numbers and team, are the numbers accurate, are the processes tight, are they impacting your ability to work on the business rather than within it. The finance function is like the product life cycle (see later) which will require re-investment to grow and adapt to the new demands. As the business moves through the growth phases the need for a suitably qualified accountant will increase. You must assess the skills you need now and the future when deciding which version of accountant to use. ACA tend to be more practice driven and do operate within industry, CIMA more management accounts driven, ACCA a combination of both practice and industry driven and CIPFA being local government driven. Although technically, anyone of these can do a role, the decision is driven by experience, personality, getting the job done and meeting tomorrows needs today.

Check before you recruit.
Before you allow someone to look at your records or even make offer a job, check the validity and request their membership number, copy of their qualification certificate, practicing certificate (if applicable), seek references and check with the professional institute to ensure they are genuinely qualified and not been subject to any disciplinary hearing.

Recruiting an accountant.
If you are recruiting or interviewing for any accountancy role, it is important you understand exactly what you are recruiting for and why you are recruiting or appointing an accountant. Do you want them to do the statutory accountants, corporation tax filing, internal auditing etc.? Are you after a book keeper, accountant qualified by experience but not qualified with exams, or an accountant with formal qualifications ranging from AAT to Chartered status qualifications? An accountant with Chartered status has a strict ethical code of conduct to comply with. Some business owners can become very frustrated with the ethics of an accountant. However, these ethics are in place to ensure the integrity of the profession they belong too and to protect their employer given their specialised skills and knowledge.

Replacing an Accountant.
There may come a time where your accountant resigns or you realise a different skill set is required. You may have an external accountant, employee or director of the company to change. This can be a painful decision for the business owner, the team, the individual and the organisation. Sometimes the business owner doesn’t understand how much the control or business understanding the accountant has until they leave. I once had to step into an organisation after an accountant died due to a car accident. No one knew the passwords for the accounting server or payroll package. Do you have these vulnerable issues? If so, this must be handled with extreme care to prevent the business and owner suffering a meltdown.

The Product Life Cycle
The table shows the general life cycle of revenue over a period for businesses. The peaks and troughs will vary which drives how you resource and structure your finance department. The pace of revenue will drive the demand for resources. The finances function can quickly turn into an ugly mess requiring a substantial investment, change of year ends, and cash outlay to recover. This is critical when companies have a legal duty to file accounts with companies’ house creating an ultimate deadline. File these late and it looks bad by credit agencies, banks and funders.

The Phase of Growth General Resources Used. Qualifications
Start Up Start Up Do it yourself booking
External/Internal Book keeper.
Retired accountant.
Part Time/consultant  Unqualified.
Qualified by Experience or AAT
Possibly dealing with funders requiring qualified accountant
Qualified by Experience or AAT
Possibly dealing with funders requiring qualified accountant
Growing Early Using own external accountant
Outsource Service
Ranges of Options are
Qualified by Experience or AAT
Part Qualified Accountant.
Part time Finance Director
Qualified Accountant
Growing Fast Using own external accountant heavily.
Recruit own Full Time Accountant.
Finance may be brought in house. Business will need to recruit a qualified Accountant who are experienced here.
Growth Slow down Qualified Accountant focusing on cashflow and costs. Finance team may be become battle scarred.
Sustaining Qualified Accountant Qualified Accountant with change Management skills to fire fight to prevent decline
Decline Qualified Accountant managing Cashflow Accountant resigns as seeing trouble ahead or treads water.
Decay Qualified Accountant waiting for administration or redundancy Team is battle scared.
Turnaround specialist required
Possible risk of Insolvency appointment.

The article has covered the various accounting institutes. A popular way to grow your business is to recruit an AAT person and support them through the studying to MAAT, FMAAT and onto one of the Chartered status routes. Other options are to outsource the role requirement or appoint your own accountant with the word chartered included. Also, remember your accountant must follow your rules, procedures and their professional ethics. A good qualified accountant should be adding substantial value across your organisation. Use them well, and they will serve you very well.  Even with all the hard effort to become a Chartered Status accountant, you still need to be careful who you recruit. I am often shocked when I come across qualified accountants who have embezzled employer’s funds, abused the position of trust, and knocked the reputation of those who are genuinely are hardworking, honest and loyal accountants. Choose your accountant with care, do your own due diligence and don’t be afraid to ask your auditor to interview them.

I hope the article has given you an insight into the various accounting professions and meaning of the funny letters used after accountant’s name. Icon Business Solutions can help *you* understand the needs of your organisation and help *you* with the process using one of our experienced advisors. Contact us today for a free no obligation chat.

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