How successful businesses utilise their Accounting and Tax departments.

William P.W.Omony MBA Fin. Services  (U.K.) writes:   All businesses aspire to perform at their peak in delivering their client value proposition though not all achieve this objective.

Having worked globally with both SMEs & Big businesses, there seem to be a pattern of how successful businesses do utilise even the simplest of units in the Accounting and Tax services department.

How well a business utilises these departments have significant effect not just on the growth of the business but can also be used to influence the strategic direction of the business.

At a time when public finances are tight and almost every business is being monitored and reviewed as to how much Tax they are paying or how the entity is structured, a well-functioning Accounting and Tax department may be what the entity needs for performance improvement.

We explored how peak performing businesses utilise their Accounting and Tax departments. Here is a brief snap shot,

1. It’s not just about the numbers - In an age of big data, almost all businesses are striving to generate as much information as possible so as to make better decision. Financial data generated by professional Bookkeeping can be a great start to inform decision making within entities. Most businesses use Bookkeeping only as a recording tool for year end reporting and are less concerned about utilising it to inform the entity of what would happen if certain variables like product sales price, sales mix, purchase trends, client buying patterns, customer payment discounts and other variables could have on the way the entity delivers its value proposition. A rethink to incorporate the mind set makes the business better at appreciating the issues behind the numbers rather than the numbers in themselves.
2. Turn compliance into value creation – It’s a global requirement for businesses to file returns and reports which are a reflection of their activities over a period of time. Some of these reports are required by statutory authorities like HM Revenue & Customs & Companies’ House in the UK and IRS in the US. Most such reports are annual and no one bothers to question anything about them until when the 'filing deadline' is approaching. The motivation for most of the questions is to avoid being penalised by the authorities as a result of non-compliance. While some entities prepare quarterly reports to inform the markets of their performance, a little less prepare these reports so as to enhance their performance in delivering better services to their clients. The culture is much worse when working with SMEs who in most cases ask the difficult questions about their financial statements when they are looking for financing. Issues like, how can we strengthen the asset base? What questions might lenders ask of our financial position & operations should we require extra financing? How does short term high/Low debt affect our business performance in both the short and long term? Yet very few try answering these questions so as to improve performance. It’s a well-known that business environments are much more fluid today and becoming even much more with advancement in Technology though its only peak performers that turn the compliance issues in to performance improvement tools.
3. Accounting and Tax driven Organisational strategy – Strategy has for long been a 'thing' for the elite and the ‘chosen ones’ aiming at the C-Suite positions in an organisation. Strategy is making decisions, and on a day to day basis there are many decisions being made within organisations. Accounting and Tax are among the few departments that have to build some relative knowledge of the whole organisation so as to be effective in delivering peak performance. The inter dynamics of the various requirements including risks that have to be monitored, places these departments at the centre of supporting peak decision making. Whether in the process of developing or reviewing organisational strategy, Accounting and Tax departments have not just the knowledge but also the capacity to reliably drive & shape organisational strategy.
4. Planning and forecasting – While many SMEs have been accused of not having a business plan and as such curtailed their likelihood to perform at their best, It’s not known how many of such businesses do plan and forecast their activities then structure them to enhance their performance through variance analysis. At the SME level variance analysis provides the best way to adjust to the business environment so as to improve performance, a much difficult undertaking for big businesses given their size and complexity. The use of management and other performance reports including business plans has been a key part of peak performing businesses development strategy.
5. Adjusting to harness globalisation – Globalisation has changed the way businesses operate. Even SMEs have to position themselves to meet global market needs or at least envision the potential of serving clients across borders. This focusses not only on generating more revenue but also on improving service or product delivery and the tax and other regulatory requirements that have to cater for stakeholders beyond the businesses geographical or political borders. With a fully functioning accounting and tax unit, issues like international market development, succession planning, international embargo, money laundering and many others will help entities structure themselves to perform better.

While accounting and tax departments are ‘backward’ looking in preparing performance reports, it’s their ability to look forward and to reliably answer pertinent questions affecting entities that define peak performing organisations. How is your business tapping into the strength of its Accounting and Tax department?

William PW Omony is the Manager/ Tax Consultant at Proactive Consult and CEO of PWO Prop Ltd, A property Investing and Sourcing Company. Proactive Consult is a Business and Tax consultancy firm in the City of London. We work with Individuals, SMEs & Multinational Companies in supporting their Tax advisory, compliance and reporting requirements.