An accounting professional may be required to perform an analysis of a company and report their findings.
One of the ‘tools’ that can be used is a SWOT analysis. This is what should go into a SWOT analysis and how useful it could be in the workplace.
A SWOT analysis can help inform strategic planning and decision-making. While a SWOT analysis is generally used in business to analyse an entire company, an accounting professional may focus their analysis on the accounting system within a company.
A SWOT analysis is used to identify internal strengths (S) and weaknesses (W), and to analyse external opportunities (O) and threats (T). In addition to each individual element, a more detailed SWOT analysis can combine several of these elements. Let’s start by looking at the individual elements.
Strengths and weaknesses
It is important to go deeper than simply looking at ‘face value’. Do not simply list basic information in your SWOT analysis, show a higher level of skill and knowledge. Do not be afraid to perform a ratio analysis or additional research on ethical issues. So, what do the elements of SWOT entail?
These are elements of the accounting system which are currently ‘strong’. Specific areas which are running efficiently and effectively. These are positive elements to the accounting function.
Weaknesses are internal elements of the accounting system which are not running to their full efficiency or effectiveness. Weaknesses are important in a SWOT analysis because they are obviously areas which are hindering progress.
Some example strengths and weaknesses:
- Staff skill levels (high = strength, low = weakness)
- Individual elements of the accounting function working well (strength) or poorly (weakness). Examples would be trade receivables paying quickly or slowly, is there an opportunity to calculate the specific receivable days?
There are a vast array of strengths and weaknesses within a company. Anything considered to be a strength can conversely be a weakness if it is being performed badly. Occasionally, a strength is also a weakness and vice versa. For example, if the accounts team is very small, perhaps one or two people, then the strength is that they have a full picture of the organisation and the weakness may be that there is a no cover for sickness. There may be few formal systems because they are not needed so time is saved, however few formal systems may increase the risk of fraud.
The opportunities of an accounting function (or a company) are essentially areas which offer the opportunity to be developed and improved. In turn these improvements should then improve the accounting function.
Threats are external influences affecting the company and the accounting function in general. They can be difficult to spot, certainly more difficult than internal factors but they are essential to make a SWOT analysis worthwhile.
Some examples of opportunities and threats:
- The threat of new government legislation (pay increase, pension changes)
- The threat of cyber-attack because passwords are not being altered frequently
- The opportunity to outsource some functions such as payroll
When you are ready to perform a SWOT analysis for a company you should consider creating a table like the one below.
An employee could systematically go through relevant company information and when something of use is found, log it into the table. This isn’t going to be in the main body of text so you can be as formal or informal as deemed appropriate.
Earlier in the article the idea of connecting the different elements of SWOT was mentioned. This technique is useful when it comes to making suggestions for improvements to an accounting function. In this case, a diagram such as the one below would be good (you may prefer your own design, provided it does the job, this is fine).
Using the previous example from earlier in the article:
The factor that governs the success of a SWOT analysis is whether it leads to action or not. Even the most comprehensive analysis is useless unless its findings are translated into well-conceived plans, new processes and ultimately better performance.
Read more on the basics of accounting;
- Study tips: Spreadsheets for accounting
- Study tips: Write in a more professional way
- Relationship building for influence and impact
Mathew Pickering is an AAT lecturer at The Sheffield College, part of the team which won Training Provider of the year (medium size provider) in 2015.