Take, for example, the business affairs of a small private limited company manufacturing products for the retail trade. An accountant will be needed to advise on the day-to-day procedures for keeping a record of the payments into and out of the business, debtors and creditors, salaries and other payments to employees and to the PAYE and National Insurance authorities. These will have to be supervised to see that they are done accurately and in accordance with the law. Once a year, annual accounts must be prepared, and if the turnover is high enough, they must be checked by an outside auditor another accountant to see that they are correct. The auditor must certify that the accounts are a true record of the year's trading, and fulfill all the legal requirements of the Companies Acts.
The Inland Revenue will want to be assured that the company has prepared true accounts for tax purposes, and will be more likely to be satisfied if a professional accountant has been involved in their preparation. But the accountants can do more than this where tax is concerned. Because of their knowledge of the taxation firm's tax bill. If the company wants to expand, a good accountant will be aware of all the sources of finance available, from banks, government organizations, financial institutions and government grants. An accountant will be needed to prepare a good case for the company if it wants to borrow money.
The accountant's role is not limited to analyzing what has happened in the past: a company must make plans for the future, based on its financial resources, and the accountant can help here too. Information on long-term costs and prospects, potential markets and market trends, prediction of difficulties, and how to avoid or meet them before they occur, are all areas where the accountant has skills to offer, to provide a basis for sound management decisions. Perhaps even more important are the monitoring functions an accountant can perform: keeping a check on credit control, the cost of stocks of materials and components, whether the sales force are selling according to their targets, and whether production is keeping up with sales.
It is not only manufacturing firms who need the help of accountants: public companies, local and national governments, service industries, and self-employed people from actors to plumbers can use their specialist help to improve their income and get better value from their financial resources. Although there is a lot of routine, sometimes boring, work involved, there are the compensations of variety, and the satisfactions, not only of getting the accounts right, but also of helping a firm or an individual to succeed.
One expanding area of employment for accountants is in insolvency practice. When the economy generally is in difficulties there is, naturally, a rise in the demand for insolvency practitioners. There are three main types of role for the insolvency expert: the receiver who aims to sell the firm as a going concern; the liquidator who sells off the assets and winds up the company; and the administrator who plans for the organization's survival, perhaps through restructuring on a sounder basis.
What Kind of People Make Good Accountants?
You are unlikely to make a good accountant if you suffer from the all too common complaint of 'numerophobia' a are reasonably at home with basic mathematical concepts, and know how to use a calculator (and how to check that you are using it correctly), that should be sufficient. Most professional accountancy bodies specify GCSE maths (grades A-C) or equivalent as the basic qualification, but if you have had to struggle to get it, and have not enjoyed it, it's probably best to leave accountancy alone.
An important quality is the ability to think clearly, and keep track of many different strands in what may be a confused mass of figures. If you can keep hold of the various strands, and disentangle them so as to present a coherent, consistent picture, with no loose ends, you should be able to acquire the necessary techniques for compiling and presenting accounts. A liking for crosswords and other puzzles is probably a good indication.
Then you must be able to put down your thoughts and conclusions simply and clearly, so that they can be understood not only by other accountants, but also by clients or management without accountancy training. All the accountancy qualifications lay great stress on this skill, perhaps because it is rather unexpected. Figures alone are no use: it is essential for the message they carry to be communicated properly.
Tradition dies hard in most professions, and accountancy is no exception as far as appearance is concerned. You are more likely to be expected to wear a suit to work than jeans and a sweatshirt, and you would have to be extraordinarily brilliant or self-assured, to get away with orange, spiky hair in the office. But, paradoxically, good accountants should not be too conformist in their thinking. They have to know their own mind and have confidence in their professional judgment. It is essential that the advice they give should be impartial, like their accounts. They should not be swayed by what their clients may want to hear.
It helps if you have a good memory, and if you are Jane, read History at university and so left without a relevant degree. Her first job after leaving university was in general local government administration.
It soon became fairly clear to me that I needed a professional qualification as well as my degree if I wasn't going to do something directly relevant like teaching. Accountancy seemed one of the best forms of general business training that was available; this was before the development of the Master's administrative degrees and those more up-to-date business qualifications. Having decided that accountancy would be very useful, I then had to decide on one accountancy qualification out of the number that is available. I thought about the public finance qualification or management accounting as well as the certified or chartered approach. I decided that at this stage I wanted to keep my options as wide open as possible, and therefore I wanted the more general certified or chartered approach and it just so happened that I chose chartered accountancy.
What I enjoyed about it was the variety of the training. You have the opportunity to see a number of businesses at first hand, and you get a very privileged access as auditor to the accounts of major international companies. I always found that very interesting. And I also found the qualification itself intellectually quite useful.
My advice to people setting out on accountancy training would be to decide, if at all possible, where they want to be in five or ten years' time. You really do need to decide at an early stage how you want to see your career progressing in the future, because if you know early on that you want to work in local government or something like the National Audit Office you may decide that you want the public finance qualification rather than a more general chartered or certified approach.
I think accountancy is also something for which you do need a fair amount of patience. You can't expect it to be exciting to begin with. You are told, as a graduate looking for a job or potential graduate looking for a job, that the world is your oyster. You know that employers really want good graduates but even so there has got to be a learning curve before you are going to be much use to anybody.
Insolvency is certainly another important area at the moment. It is one of those interesting things because it does obviously follow the economic cycles of a country. You will find that insolvency can be booming when more general accountancy is being squeezed. They are sadly seen as undertakers, but the insolvency practitioners I've come across have actually been live wires because they don't want to bury a company, they want to restore it if possible. At their best,
All you can achieve then is selling the assets for whatever you can get for them. So what insolvency specialists are trained to do is to run the business. If they can they will turn it round or at the least they will get a better price if they sell the goods or assets as a going concern.
It is a useful training to have. Usually people will get an insolvency license on top of an existing accountancy or legal qualification. The other route is through something like the Official Receiver's Office where you will get people who have specifically trained in insolvency, although normally they will also be trained as accountants.
As I say, I've always enjoyed the qualification and all I've been able to do with it. One of the most exciting developments for me at the moment is working with ACCA who have been involved a lot in training in the newly democratized countries in Eastern Europe; in fact, we also have training contracts in China. What countries need when they are developing from a command economy to a market economy is a method of accounting for and controlling economic activities and particularly industry and commerce. My particular input has been to train accountants in these countries in auditing techniques, though again they also need accounting expertise more generally. Under a command economy they have been looking to control production rather than account for the use of resources to third parties, shareholders or investors. It certainly isn't dull.