What would happen if your accountant left?

20th October 2017

One of the things I love about my job is the opportunity to get involved in a wide variety of companies. It’s fascinating to see how different businesses operate in different sectors. 

Because we work with a large number of fast-growing companies, it’s usually a pleasure to come on board and help successful companies grow even faster. 

But it’s not all good news. Some of the companies we work with come to us because they are in financial distress. Very often, they had had poor financial management and they need help getting out of difficult situations. 

Recently I’ve got involved with an organisation where the FD has left under a bit of a cloud. There was no handover, and he’d always kept his cards very close to his chest. So although there are other capable members of the team, only the FD knew the full story of what had been going on financially. 

We’ve been engaged to upgrade all their financial systems and processes, and also complete the accounts for the last financial year. However, that’s proved near-impossible, because the spreadsheets the previous FD had left were so incomprehensible that it was difficult to see how he’d closed off the accounts at the previous year end. 

Most businesses rely heavily on certain individuals, and feeling the impact when a key person leaves is perfectly normal. But no organisation should ever be left in a position where essential tasks can’t be completed when someone leaves.

An important part of avoiding that situation is having robust, proven systems and processes so that the important jobs always get done the right way, no matter who’s doing them. But oversight and having checks and balances is important too. 

If a business has an FD – or even an accounts person – there tends to be a huge reliance on those individuals to get it right. Other directors tend to ignore financial matters completely, with the attitude that ‘the FD deals with that’.

But if something goes wrong on the financial side, the consequences can be very serious indeed. And it’s important to remember that in law all directors bear equal responsibility for the organisation; not being a numbers person is no excuse if things go wrong.

It’s often difficult to see that there are problems because things can be running smoothly day-to-day, even as bigger problems mount up.  It’s only when it comes to the less frequent tasks that trouble become apparent. 

The organisation I just told you about experienced a mix of all these factors – the perfect storm, if you will. 

They didn’t have the right financial systems in place, so the FD handled important business the way he liked. Unfortunately, that way was not comprehensible to anyone else. The other directors never got involved and there were no checks and balances, so no one ever noticed, especially as bills got paid and it seemed like things were running pretty well on the surface.

Now that he’s gone, the organisation is left in financial turmoil – and the other directors are legally responsible.
The lesson here?

No one ever asked one simple question which would have revealed all these problems in one fell swoop: 

“What would happen if our key financial person left?”

Make sure you ask it in your company, and that you have a good answer.

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