What to do with your first pay packet

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If you have recently graduated and are starting your first paid job, or if you have been accepted for an apprenticeship and you are being paid while studying, your first pay packet can feel like an exciting time.

This is the start of your journey on the career ladder where your earnings are likely to increase over time as your skills improve.

As a young person or mature student starting a new job, it can feel daunting to have so many bills and outgoings to pay while also trying to save and plan financially for the future.

Here are some tips on how to make the most of your first pay packet and use your money wisely to increase your financial freedom.

At first look back at the first couple of months of spending and work out what you’re going to need to pay for. This might include a clothing Budget Meals at work, a car costs or the cost of commuting and a train for dry cleaning, and any other costs associated with the world of work. If you’ve moved out from home, there will be different bills to pay, it’s a good idea to set up a spreadsheet, so that you can look at all the different expenses and work out what your outgoings will be each month.

Set up a budget

“I remember going into a shop and feeling as though I never had as had so much money in my life when I was first paid,” says Chanelle Pattinson DipPFS, an Independent Financial Adviser with P&P Invest. “In hindsight, it was not really very much, but it felt a lot at the time.”

She advises putting together a budget to manage your money and quantify your income and outgoings every month.

“Try to include small expenses like Spotify, because although it doesn’t sound a lot, in fact £10 pounds a month, when there are 10 small items, soon mounts up when that money is leaving your account every month.”

Don’t forget to budget for going out and having fun, especially as you will still want to socialise and network.

“Fun is often where people fall down with their budget,” she says. “They don’t stick to that budget because they haven’t allowed themselves any money for going out or enjoying themselves. When you are in your first job, you’ve just come out of university or college and you still want to be living your life.”

Use apps

Once you’ve got the budgeting and spreadsheet set up there are lots of apps that will keep track of your spending and bills. They will help you work out your income and expenditure and your monthly costs.

When you are budgeting, she suggests putting asie 50% of your monthly income aside for bills, if you can, then 20 to 30% for fun. And then the remaining 20 to 30% on saving and investing.

Set up an emergency fund

First of all you need to set up your budget, then you can start saving toward an emergency fund. This is a cash fund which you can access quickly if you need it. An emergency fund will save you having to borrow money at expensive rates if your car or washing machine breaks down, or if you lose your job or are unable to work. It should cover three to six months’ worth of household bills and expenditure.

“Once you have an emergency fund set up you can start to save towards your future investments,” she says. “I say to clients to split your investments between a pension, and an Individual Savings Account (ISA), as they both have advantages.”

Join your workplace pension

If there is a workplace pension, you should join as soon as possible.

“If you are employed, and you have the opportunity to auto-enrol into a workplace pension scheme then that’s a really good idea,” she says. “This is because you will receive the employer’s contribution which is effectively free money, and you will receive tax relief from the government, and then you will also be making your own contribution.

“If you’re fresh out of uni, even a small amount invested in your pension will put you ahead of the game. For example, £100 pounds a month now in 40 years will give you a great pension.”

Think about investing for the future

An Individual Savings Account (ISA) does not give tax relief on your contributions but does protect your money from income tax and capital gains tax once it is within your ISA wrapper.

If you do need to take money out in the future – for example for a house deposit – you can take out of your ISA. By contrast your pension fund is not accessible under the current rules until you are age 55.

“Anything you can contribute to a pension and ISA is better than nothing,” she says. “If you can only afford £50 a month that’s great. Many of my clients are in their 20s and 30s and they’re saving up for a house deposit. They split their investments between a pension and saving for a house.”

Start a pension – even if you are in your 20s

Keith Humphrey, chief executive of Leeds-headquartered Workplace Pensions Direct, says pensions are rarely at the top of people’s priority list.

“The fact that pensions and ‘retirement planning’ often fall into the same strand of conversation doesn’t help either, particularly when people feel like they don’t have enough disposable income for the life they’re living right now – let alone a chapter of their life which lies decades away!” he says.

But the UK has an ageing population. In 2014, the average age of UK residents exceeded 40 for the first time ever, and by 2040, it’s expected that 1 in 7 people will be over 75. The ratio of people in work versus those in retirement will have therefore shifted from 6:1 in 1990, to 2:1 by 2030. This means that, in less than 10 years’ time, 1.9 people in work will need to support every 1 person retired.

“The guaranteed final salary pension schemes enjoyed by previous generations, either no longer exist or are far less generous when they do,” he explains.

A 2021 report published by Interactive Investor & LCP – Is 12% the new 8%? – highlighted that long-range forecasts for real returns on pension fund investments, are falling. Workers must therefore now contribute a staggering 50% more to achieve the same predicted amount when they retire, compared to a decade ago.

e.g. a typical employee on average pay, who puts 8% into their pension pot from the age of 22, would now receive a forecast of £85,000 on retirement (based on 2017 growth assumptions). However, a 22-year-old who started work ten years earlier in 2007, would have a projected retirement pot of £131,000 – that’s £46,000 more.

“People are therefore going to be faced with the increasingly difficult – and unexpected – situation that, when they retire, their income will be significantly less than anticipated. And considering they’re likely to live longer, this will have a considerable impact on their quality of life,” he says.

Key takeaways:

  •  It’s always a good idea to start with a budget, and when you’ve mastered that, you’re in a good position to build up an emergency fund.
  •  Once you’re in the world of work, and your salary starts to increase, you’re in a great position to invest, as you have got the basics right,
  •  As an accountant, if you want to set up your own practice or become self employed, then being personally financially secure and having a pension and savings behind you gives you the freedom to leave a paid job, and set up on your own.

In summary

  • Start with a budget so you are in control with your income and outgoings
  • Make the most of workplace pensions as this can be a valuable way to start building a retirement fund as soon as you start work.
  • Use a combination of ISAs and pension contributions to retain financial flexibility.
  • Early contributions do not have to be large, but regular contributions will set up your personal finances for life.
  • An ISA can give you flexibility and can be used alongside a pension for future financial security.
  • Start a pension as soon as you start work.

What roles can I apply for after completing an AAT Professional Diploma?

Posted by & filed under Students.

There’s a wide range of career opportunities available to students who finish an AAT professional diploma in accounting (Level 4). We take a look at what’s out there 

“For students who have achieved the AAT Professional Diploma in Accounting (Level 4), if they complete one year’s relevant work experience, they can apply to become a full member of AAT and use ‘MAAT’ after their name,” says Sam Hannigan, programme manager at Premier Training. 

With an AAT Professional Diploma, you can apply for the following roles: 

Finance officer 

Finance officers manage many of the financial issues taking place within a company, including creating budgets, overseeing spending, preparing financial statements, assisting with audits, fiddly VAT stuff and working closely with the C-suite. “Many AAT Professional Diploma students want to become a finance officer – it’s a great job because it’s so general and wide-ranging,” says Adam Ruston-Shaw, head of delivery at training provider, Babington. 

Commercial analyst 

This job involves scrutinising areas of the business to identify where it can make savings and reduce spending. You’ll need to be confident making gut instinct decisions, comfortable with meeting stakeholders, plus have strong analysis skills. It’s also a great springboard into business partnering. 

Senior bookkeeper 

A pivotal part of any finance team, senior bookkeepers manage accounting records, such as recording transactions, processing payments and producing financial reports.  

VAT accountant 

VAT accountants advise businesses on anything to do with VAT, particularly its impact on any transactions. 

Cost accountant 

A cost accountant determines the costs of providing a service or making a product. It involves deep-diving into lots of data, plus analysing expenses in the supply chain such as labour, shipping and admin costs. 

Fixed asset accountant 

This role involves overseeing the fixed assets of a firm (e.g. property and equipment), and ensuring these are all accounted for accurately. 

Payroll manager 

Payroll managers run the payroll team within an organisation and are ergo responsible for making sure all staff are paid their correct wages on time. 

Indirect tax manager 

A role that’s become even more important post-Brexit, indirect tax managers advise how indirect taxes (VAT, excise duties and import tariffs) impacts upon a business and/or clients.  

Payments and billing manager 

Payments and billing managers supervise the raising of invoices in an organisation to ensure these are all calculated correctly. 

Senior fund accountant 

Working alongside investment managers, senior fund accountants produce accounts and investor reports for investment funds. This role usually comes with a high starting salary, as you might expect. 

Tax supervisor/tax manager 

Tax supervisors or managers oversee tax plans for the business that they work for. It’s a job that provides access to senior stakeholders, and as such, is one of the most coveted positions in accountancy. 

Freelance bookkeeper  

“There’s nothing to stop AAT Professional Diploma students from setting up their own bookkeeping service – I’ve had some students do this before,” says Adam, who also notes aspiring freelancers may benefit from taking a software course too.   

Further reading:

What’s the best way to get work experience?

Posted by & filed under Students.

Finding work experience can sometimes be difficult, but it’s important to keep at it, as choosing the right placement or internship and making a success of it can be the golden ticket to the job you want.

Not all internships go the way of Tom Wagg, the 15-year-old schoolboy who discovered a new planet the size of Jupiter while doing work experience with an astrophysics professor at Keele University in 2018. However, whether you’re looking to arrange a week shadowing a senior bookkeeper or you’ve landed a year-long placement at a “Big Four” titan, it’s still possible to stand out and gain that first step on the employment ladder.

Here, Sophie Baldry, senior marketing executive at RateMyPlacement (ratemyplacement.co.uk), provides a step-by-step guide to finding work experience opportunities and making the most of them. 

Create an online professional profile 

Before applying for any work experience placements, build your personal brand online to give you a competitive edge, Sophie advises. “Tailor your CV to the employer and create a LinkedIn profile. You could also try networking on LinkedIn by following employers, getting involved with conversations and publishing articles to show you’re an accountancy expert.” 

Finding the placement 

“If you’ve identified the organisation you’d like to work for, you can absolutely approach them directly – perhaps by contacting their HR manager on LinkedIn,” says Sophie. “You can also head to RateMyPlacement, a one-stop shop for work experience placements. We’ve got over 2,500 employers on there, including many accountancy firms. You can set up alerts for when opportunities become available, or read reviews from previous interns to find out what the company is really like.” 

Ask about payment 

Sophie notes that you really shouldn’t offer to work for free. “We only advertise paid placements on RateMyPlacement, but sadly, there’ll be some industries/companies where you may have to explore unpaid roles to get a foot in the door. Travel expenses are usually covered though – find out first.” 

Do some pre-placement research 

“Landed a placement? Great. Before you start, research as much as you can about the company,” Sophie advises. “It’ll show commercial awareness, and help you create an impact straight away.” 

Don’t worry if you’re a mature intern 

Sophie urges students not to let age deter them from applying. “Don’t let age put you off! It’s about talent, plus many employers actually do look for older interns. I read about a 79-year-old apprentice recently – and don’t forget that Prince William did work experience at M15 when he was in his late-30s!” 

Surviving the assessment day 

“Some firms will expect you to complete an application form and/or attend an ‘assessment day’ with other candidates,” Sophie explains. “If you get summoned for an assessment day, expect group exercises/tasks, psychometric tests and delivering a presentation. How to survive? Remember, employers look for ‘soft skills’ – how you interact with your peers and approach conflict – so showcase these if you can.” 

Making a good impression  

While undertaking your work experience, making a good impression is paramount. “Be enthusiastic, willing and curious – ask as many questions as you can to show you’re eager to learn,” says Sophie. “Also, even if you hate the team, don’t show it. Just put a smile on your face and be a good team player. Once you feel confident enough, feel free to volunteer yourself for projects and suggest ideas.”  

Networking is also important. “If somebody in the office asks you to attend a social event, absolutely go. However, if it’s 9pm on Friday, you’ll still need to be professional. If you misbehave, everybody will remember you on Monday morning.” 

How not to become a tea-making dogsbody 

“Sadly, there’ll always be a menial aspect to work experience,” Sophie notes. “But if you are making cups of tea and grabbing people’s Pret orders all day, it could be time to speak with your manager about how this isn’t helping your development. Don’t be afraid to push back if you think it’s necessary.” 

Coping with virtual placements 

In the current working environment, virtual work experience is common. “If you’re doing work experience at home, it can be difficult to be self-motivated,” says Sophie. “Try to be proactive and ask lots of questions of your team to stand out.” 

Made a mistake? Own up to it 

“We’ve all made mistakes on work experience,” says Sophie. “If this happens, the worst thing you can do is lie. Taking ownership of everything you do is part of the learning process, plus it shows your integrity and that you’re a trustworthy employee. Lie and it will be a downward spiral…” 

After the placement 

Remember to ask for feedback to help with your development. “The company might have a feedback process for interns, but if there isn’t, feel free to ask,” Sophie advises. “Try to stay in touch with any contacts you made at the firm, on LinkedIn or the occasional text. And to make your CV glisten afterwards, don’t just list the work experience role – highlight any projects you were involved with, any great feedback you received or challenges you faced.” 

Further reading:

Is it time to look again at cryptocurrency?

Posted by & filed under Cryptocurrency, Members, Policy.

Phil Hall, AAT Head of Public Affairs & Public Policy considers the approach of British regulators to the increasingly popular trend of cryptocurrency investment and usage.

Cryptocurrencies have been around for more than a decade, with the best known, “Bitcoin” first introduced in 2008 and many others entering the market since. As recent articles on AAT Comment have highlighted, they can’t simply be dismissed as a passing fad but instead as a sector of limited but growing importance.

In recent years, regulators have taken an increasingly tough stance on cryptocurrencies – for good reason.

In 2019, a report from the G7 on stablecoins found that they pose a serious threat to a range of public policy areas, including “challenges to fair competition, financial stability, monetary policy and, in the extreme, the international monetary system”.

Here in the UK, back In January 2021, the FCA starkly warned that cryptocurrencies are such a high-risk investment that, if consumers invest in these types of product, they should be prepared to lose all their money. There can be no stronger warning than that but is anyone taking any notice?

According to research published by the Financial Conduct Authority (FCA) in June, over 2 million adults in the UK own digital currencies, an increase of 400,000 on last year.

Rather worryingly, the same report found that 14% of cryptocurrency investors used some form of borrowing to invest.

Ban for Binance

The FCA’s tough line on cryptocurrencies is now extending to action. Just a few weeks ago it banned Binance, the world’s biggest cryptocurrency exchange, from conducting any “regulated activity” in the UK.

However, the action is not quite as far-reaching as it first appears. Although it means people in the UK are no longer permitted to use Binance’s services to bet on whether the price of a cryptocurrency like Bitcoin will go up or down, there remains nothing to legally prevent people from using the Binance exchange to buy and sell crypto-currencies because doing so is not a regulated activity.

With regulatory warnings increasing in frequency, tone and severity, it seems rather contradictory that the Bank of England should continue to toy with the idea of introducing its own digital currency – a Central Bank Digital Currency (CBDC).

Back in 2018, the Bank of England confirmed that its Financial Policy Committee had assessed crypto assets and concluded that they do not currently pose a risk to monetary or financial stability in the UK but that they do pose risks to investors and like the FCA, warned that anyone buying crypto assets should be prepared to lose all their money. 

In March 2020, the Bank then launched a discussion paper on the subject of creating a CBDC, and an update provided just a few weeks ago confirmed that the Bank of England and HM Treasury have created a CBDC Taskforce to co-ordinate the exploration of a potential UK CBDC and that research is ongoing.

The Bank is keen to stress that a CBDC would be fundamentally different to cryptocurrencies or crypto assets because cryptocurrencies like Bitcoin and Ethereum are privately issued rather than issued by a central bank. A £5 CBDC would be worth £5, ensuring the intrinsic value of the currency in a way that private issuers cannot.

Summary

Although I would heed the Bank of England and FCA’s oft-repeated warnings about cryptocurrencies, I’d certainly be more relaxed about using a digital currency issued from a central bank. This would not only avoid the energy usage concerns associated with Bitcoin and others but would also provide the confidence and stability associated with major central banks. As Bank of England Fintech Director, Tom Mutton, recently stated, “…let’s not throw the blockchain baby out with the Bitcoin bathwater.”

Accountants take the stage in the glamourous world of film and TV

Posted by & filed under Uncategorized.

We meet two accountants working in the exciting world of accounting for film and TV productions…

“Watching TV is  different when  you’ve been  involved in it”

Cheryl Anderson, Assistant Manager – film and TV, Saffery Champness

As Assistant Manager in the film and TV team at Saffery Champness, Cheryl Anderson helps production companies with their accounts and audit, as well as advising on the tax reliefs that the projects will qualify for and then helping them get those.

Saffery Champness has worked on a number of huge TV shows, including Game of Thrones, Mr Selfridge, and Downton Abbey, and blockbuster films, including Skyfall, Prometheus, and The Dark Knight Rises.

Part of a team of 40-45 people, Anderson has been with the company for more than three years.

“I work mostly on film and TV productions, but I have also done some work for video games as well,” she says. “Anything that’s been produced in the UK, the chances are they’ve probably come to us for help with claiming the tax credits.

“A lot of the things we work on now, I’ll see on TV and say: ‘Oh yeah, I did that’. We’re only a small part of the production, but it’s cool. I like that side of it.”

For Anderson, the main challenge of her role is reviewing costs, as there are various criteria to follow in order to claim the tax credits.

“One of these is an analysis of where the costs are used and consumed, so whether they are UK costs or whether they’re non-UK costs,” she explains. “A lot of that can be quite tricky around what qualifies because it’s not necessarily where the cost is spent, it’s where the cost is incurred. Similarly, if they do have costs that are spent in another country, there are also other incentives available to them. A lot of it depends on reading contracts, which is something I had never done until I started this role.”

Although Covid-19 put a halt to film and TV production, Anderson and her team carried on working.

“Clients were in the middle of shooting when the pandemic hit and they had to down tools,” she notes. “We moved to working from home. We saw just as much work coming through, but there was a shift toward clients needing advice on the best way to keep going.”

Even though things halted, people still watched TV, Anderson points out.

“There’s always a new project or new idea. We’re involved in the early stages of productions, preparing the budget for the films or TV shows. It’s great to see projects at the start and then see them end up on your screen. It tends to be years later, as it’s quite a long process.”

A lot of the time, she might see a project right through from start to finish.

“I obviously watched films and TV before I joined the team, but it’s different watching them when you know you’ve been involved in it,” she says.

Anderson explains that when she started the role, a big part of it was learning about the tax credit and the rules around that.

“It seemed so unusual to me,” she says. “You very much learn on the job – you would never be thrown in at the deep end and asked to advise on these things when you start. You fall back on everything you learn in your studies, as you’re preparing the accounts and doing the audit, then the tax credit is sort of an addition. Skills that you pick up about cut-off around year-end and accruals/prepayments come into play, too, because a lot of the accounts are actually cost-based.”

“There’s a shortage  of accountants in  film and TV”

Simone Abecassis, owner, Daffodil Accounting

Business owner Simone Abecassis has been involved in the film and TV production industry for more than 20 years.

“When I started, it was as a purchase ledger clerk in a TV production company,” she says. “I worked my way up from there while I was doing my accountancy exams. Most production accountants are freelancers. They’ll go and work on a film or a project and then move on to another one. It’s very much a gig contract industry.”

Abecassis previously worked for a company that produced documentaries, where she worked on Who Do You Think You Are? and the acclaimed Man on Wire, which won an Oscar. She has also worked on drama series New Tricks, and on some low-budget films. Now, she mainly works in kids’ TV, with credits on Teletubbies, Topsy and Tim, and Waffle the Wonder Dog with her firm, Daffodil Accounting.

As a freelance financial controller who engages directly with the production company, Abecassis oversees the accounts team – making sure that everything is in order and that everyone is compliant.

“I will liaise with the financiers and the broadcasters, to make sure that everything is as it should be regarding costs and budgets, and expenditure to date, etc,” she explains. “There are a lot of challenges – there are very tight deadlines when you’re working on a production. At the moment, I work in kids’ TV, and the type of productions we work on are very challenging because we work with children, sometimes animals.

“Working with all of those together can be very expensive because the animals may not behave, the children may not behave and therefore the shoot takes longer.

“You don’t finish what you need to get done in a day. Therefore you go over-schedule, which means you go over-budget. So the challenge is trying to keep the budget as it should be.”

Another challenge of the job, Abecassis notes, is compliance, especially with HMRC.

“You end up having disagreements with crew members who want to be self-employed, but they can’t because their job grade doesn’t allow for them to be self-employed,” she says. “The challenge there is to make sure that we’re not making any mistakes, as you get a penalty from HMRC. That’s one of the huge challenges we face, especially when you’re dealing with 100-plus crew.”

Covid-19 has of course affected Abecassis’ job as a lot of productions had to halt.

“We were just about to start shooting on the project I’m working on before the lockdown,” she explains. “We had to put a pause on that, which extended our schedule by almost a year. That has affected the cost of the project as well. We’ve had to negotiate with the funders to try and cover all the extra Covid-19 costs we have.”

Now that most Covid-19 restrictions have been lifted, the industry is getting busier and more projects are coming through.

“There is a huge shortage of production accountants,” Abecassis adds. “If people are thinking of switching industries, there’s a very big demand.”

Do you need to be better at business driver analytics?

Posted by & filed under Members in business.

Business driver analytics matter more than ever, with directors and shareholders demanding up-to-date, relevant information on a regular basis. This needs to be easy to digest, well presented, and in some cases, shareholders need to be able to manipulate it in limited ways through their own personal dashboards.

Business drivers are a broad set of metrics; anything that affects the financial and operational results of the company. These could include:

  • number of stores or locations,
  • number of products sold (volume),
  • prices of products/services sold,
  • number of salespeople,
  • effectiveness of salespeople,
  • production rate for manufacturing,
  • energy and electricity costs,
  • salaries and wages per employee,
  • foreign exchange rates, and
  • commodity prices

We asked members how they’re developing their business driver analytics to better reflect the needs of their businesses in 2021.

We’re pushing our current tools to do more

Stephanie Mehra FMAAT, finance director, Cheevers Poole

When it comes to business driver analytics, what you get out is only as good as what you put in. During to the pandemic, we realised that we need to do more with our data. We have Sage, and Sage Construct, which will do so much. A lot of these systems are playing catch up, and over the last 12 months, I think those technology suppliers realise that they need to do more when it comes to presenting information, rather than having a standard system where any analysis of the data would require some work in Excel. We knew we needed something new; something that connects all departments in the business. 

Our shareholders expect dashboards and three-to-four pages of data analysis that they can look at very quickly, and if they need more information or analysis, you catch up with them in a meeting. We wanted to create a system where we could create dashboards easily, and that shareholders could log in any time to view their dashboards and dig into the data and our findings.

We approached it a little bit backwards in the sense that we looked for systems that would be a good fit for the main contracting part of the business. We then looked to see if the system had a good financial package. Software companies often don’t think about the overall culture of the business when they pitch systems, but that’s very important. It helps you to understand what we want to collect and analyse. We decided to stick with Procore, a specialist construction industry software, and look at what data and dashboards we can get out of it.

It’s definitely becoming cheaper to get customised systems, and our staff are more technologically savvy than we thought they were. We’re working with our providers – Sage, Sage Construct and Procore – to customise our standard systems in a way that’s not too expensive.

We’re concentrating on deepening our data lines

Ali Jaw FMAAT, finance and operations manager, M B Technical Services

We need to prove our value as professionals to our organisations by evolving our reporting away from historical data to real-time and predictive analytics, allowing us to make robust decisions that matter, in the moment.

My organisation is a fire and security specialist operating in the City of London. The metrics I commonly look at are the turnover of each site, the number of contracts we have, etcetera. This is mostly done using advanced Excel formulae, drilling down into detail on the performance of each site. Now I’m focussing on expanding the data that we have, so that we can more accurately measure the profitability of each contract, even for each engineer.

The benefits of this kind of analytical work is that we can identify more clearly the critical business drivers for us. Once you identify it, you can focus on that driver, monitor the results, look at how to improve performance and hopefully present that to management so they can make business decisions to ensure improvements in the future.

For example, say we look in detail at the profitability of each of our contracts, and some aren’t where they should be. We could look at the pricing and make sure we’re costing jobs effectively, or we could look at the time taken on each job and work out whether we need to allocate more resource to ensure they are completed more efficiently. All of these are my focus for improvements this year.

We don’t want to rely too much on tools – it’s the skills that matter

Clare Elliott FMAAT, CFO, ILUX

When it comes to business driver analytics, qualifications, experience and expertise in what you do matter more than the tools you use. The key is to really understand the finances in your organisation. Once you know your business, you absolutely know what the results should be. Then you can explain the intricacies and understand what has happened. We have a piece of bespoke software that does all of our workflows for our technical team. That does generate statistics and reports. So we use that to set targets and monitor our metrics.

Doing your analysis two different ways, using different tools is always really beneficial, because then you absolutely know that what you’re seeing is accurate. It’s very easy for business owners to fall into the trap of thinking that a really clever piece of software, like Xero, will do everything for them. And Xero is amazing, but it’s very easy to look at it in isolation. If you haven’t got all of that skill in the background work – the journal adjustment, deferred income, accruals, prepayments – without all of that background expertise, you won’t get real results from that software.

If you’re waiting for your accountant to do your year-end accounts, you’re months out of where you need to be thinking in terms of planning for your future and your business growth. I think that’s probably why we can’t quite give up spreadsheets. We know what we know, so we should use our expertise, instead of just simply relying on a piece of software.

How are accountancy firms managing an office return?

Posted by & filed under Coronavirus, Hybrid work, Members.

Hybrid working brings a new set of challenges – how are finance teams approaching them?

Many UK businesses are preparing for an office return after the last raft of Covid-19 lockdown restrictions were lifted on 19 July, a month later than originally planned.

Some firms have embraced a hybrid approach, introducing a mix of working-from-home days and in-office days and providing staff with a choice. In May, the BBC spoke to 50 of the UK’s biggest employers and found that the majority (43) were implementing this hybrid approach.

PwC have previously said they were giving staff more choice over their working hours and working environment, while EY said staff would be able to work from home for at least two days per week on a permanent basis.

So while it’s fair to say that the pandemic and the necessary shift to remote working has brought about a sea-change in what a ‘normal’ working day now looks like in terms of hours and workplace environment, many firms will nevertheless be opening their doors for the first time in eighteen months, under the latest government guidance.

But for many, there are likely to be significant logistical issues to contend with, including:

  • dealing with staff shortages due to large numbers of staff self-isolating at the same time,
  • managing concerns and fears between vaccinated and unvaccinated colleagues,
  • managing concerns around return to the office amid rising infection rates, and
  • managing and engaging with disparate teams of both home workers and those in the office.

We spoke to several accountancy firms to find out how they intend to navigate some of these challenges.

We’ve invested in software and hardware to ensure business continuity in any environment

Simon Thandi, director, UKLandlordTax and FixedFeeTaxReturn

The main concern is should any member of staff contract covid we are all then forced to isolate. However, we have had a wake-up call since the first lockdown where we realized that we needed to invest in software and hard tech. We now have a VoIP telephone system, installed our own network and invested in hardware to allow a seamless approach for staff to work at home or in the office. We are also moving towards a fully digital exchange of records with clients, which also cuts down the need for transporting paper files back and forth between home and office.

We also discussed working options in an open and frank manner with staff. Younger staff, in particular, preferred to come into the office while some older staff wanted the option to work part of the week from home. We agreed home-working on an individual basis and so far it has been working really well with staff feeling less stressed, enjoying a better work-life balance and there’s been improved productivity and client service.

Next steps: Talk to your staff and get their input. Agree on an approach that you all feel comfortable with.

Verdict: We’ve invested in software and hardware to ensure seamless business continuity across office and home environments.  

We’re continuing with home working set-ups and enforcing social distancing and mask-wearing policies for office days

Eunice Onyema, founder ENO Accountants

ENO Accountants have always embraced home working even before the pandemic, but we do recognize the need for face-to-face contact in some circumstances.

We are a small company with just three staff including myself, so workload management will continue as normal. Any concerns and fears will be managed through encouraging health and wellness and having weekly catch-ups.

We will also be adopting a minimal contact office as much as possible, continuing to work remotely with a day in the office per week.

Anticipating the potential conflicts between vaccinated and non-vaccinated colleagues means that we will continue to encourage our employees to maintain distance and wear face masks where possible. Hand sanitizing will continue to be encouraged and adopted as company policy.

Staff will be expected to self-isolate when required but because we will continue to work from home, this won’t affect us that much. We will continue to embrace and use technology for communication as much as possible

Next steps: Maintain social distancing rules along with mask-wearing where possible to reduce conflict and concerns between vaccinated and non-vaccinated staff.

Verdict: We’re continuing with home working overall with social distancing and mask-wearing policies for office days.

We’re listening to every staff member to ensure policies reflect everyone’s needs

Claudine Norden, Tax Manager, Clive Owen LLP

Communication is key to ensuring that potential problems are addressed before they arise.  Staff have been asked about their preferred working arrangements, and these will be balanced with the needs of colleagues, the firm, and clients. 

Managing staff shortages from self-isolation or infection will be a challenge. We are mitigating this with very safe work environments to minimize workplace transmission risks.  For example, we are asking for the retention of face masks, maintaining social distancing and reducing the number of staff in our offices and staff seem comfortable with this.  We have invested heavily in our IT systems in recent years and with the help of our IT colleagues, who have provided us with fantastic support from day one of the pandemic, to date our staff have been able to work remotely even when they are self-isolating therefore reducing the impact on both the business and our clients.

We already know we can work remotely or in a hybrid office/home blend and have done so successfully over the last 18 months. Keeping in contact with remote working colleagues is vital, to ensure they feel supported and able to carry out their work to the best of their ability. There are some areas where this is not the best option, particularly for younger members of the team and trainees who need to benefit from ‘in office’ learning.  We are taking our time and getting feedback from everyone, not just senior leaders and managers.  This ensures we can get a majority approach and adapt to changes and challenges as they arise. 

Next steps: There is no one-size-fits-all approach.  Talk to your staff to work out what is best for your firm and your staff.

Verdict:  We’re listening to everyone to ensure policies meet everyone’s needs and can adapt to any challenges as they arise.

We implemented a phased transition to an office return before we reopened fully

Sherad Dewedi, Shenward Chartered Accountants and Business Advisers

Throughout the pandemic, the majority of our team worked remotely. When the world began to reopen, we recognized that we needed to implement a phased return in order to protect the wellbeing of our team and allow them to readjust to office life. We initially operated a rota-style workforce, whereby certain members of the team would spend some time in the office whilst others worked remotely and vice versa. As a result, the full return to the office has been a smooth transition. We also did the following:

  • We addressed concerns surrounding face-to-face client meetings and specific requests from the team who prefer to reduce contact.
  • We utilised video conferencing facilities for meetings and one-to-one catch-ups.
  • When colleagues have to self-isolate colleagues, other team members are supported in picking up outstanding tasks. We also have tools and systems in place to enable continued home-working.

From Monday 19 July, both offices fully reopened. A select number of colleagues, owing to their seniority and role, are continuing a hybrid working model with a minimum of 3 working days in the office.

Next steps: Ensure you’re regularly checking in with all team members to find out how they are adjusting and any support they need. Don’t penalise them if they are honest with their struggles. But also, remember that as a business owner, you also have to consider what’s right for the business. In some circumstances, continued remote working just isn’t suitable.

Verdict: A full office return has been made possible by a phased transition which helped staff prepare and adapt to an office return.

Dealing with cryptocurrency as a business asset

Posted by & filed under Cryptocurrency, Digitisation, Members.

Attitudes need to change concerning crypto assets, particularly in the case of insolvency writes Rob Armstrong, Managing Director, restructuring advisory, Kroll (a division of Duff & Phelps).

Like many areas of regulation, insolvency is grappling with the increasing mainstream use of crypto assets. Kroll’s Rob Armstrong unpacks the issues and how best to address them.

The word ‘cryptocurrency’ conjures pictures of deceitful characters stealing real-life money and turning it into monopoly money somewhere deep in the dark web. But what is it actually? And how should it be dealt with in an insolvent estate?

Cryptocurrency has enjoyed a drastic increase, particularly over the past year, changing perspectives from viewing it as a means of money laundering into a serious contender for investment. Novice investors are dipping their toes in the water, and even large brands (Starbucks, Amazon, Paypal, to name a few) are starting to accept cryptocurrency as a form of payment.

As more money is being converted into cryptocurrency, these types of assets are becoming more prevalent in insolvent estates. So, what does that mean for creditors of companies or bankrupts who have invested in cryptocurrency?

Because cryptocurrency is decentralised (it’s not tied to a country’s currency, nor is it regulated), it is viewed as an easy method of defrauding people. However, that is not necessarily the case. All transactions are public knowledge, meaning ownership can be verified and traced. Because there isn’t one controlling body, everyone is accountable to everyone. This transparency is a security feature in itself as it is difficult to hide in plain sight, as it were.

There is, however, a hurdle of learning new terminologies and understanding a new process. As a result, many people shy away from dealing with it. However, unfamiliarity isn’t a reason to ignore what could potentially be an immensely fruitful asset pot.

Finance professionals must now start to change their perspective on cryptocurrency, particularly about company investments in insolvency estates, and adapt processes to enable us to deal with cryptocurrency more effectively.

So, how should a cryptocurrency be dealt with in an insolvent estate?

First, how can we identify that the company has cryptocurrency? There are various indicators to look out for to help identify whether the estate may have a cryptocurrency, such as: 

  • Transfers to exchanges as indicated in the company bank statements
  • Finding a USB key within the books and records of the company
  • Running everyday key word searches such as “crypto” or “bitcoin” against the electronic records
  • Identifying seed phrases written down within the company records 
  • Asking the directors

Once it becomes apparent that the company holds cryptocurrency as an investment, the insolvency practitioner (IP) will need to take steps to secure and preserve their investment. Just like any other asset, the IP will need to act quickly to ensure the cryptocurrency is secured correctly. Identifying and locating the key is a critical step, but the IP shouldn’t assume that someone else doesn’t have a copy of the key.

A prudent IP should transfer the cryptocurrency into a secure wallet of their own (on behalf of the estate) or to an agent. Under the new FCA legislation, cryptocurrency held on someone else’s behalf must be held by an approved agent, who could secure the assets properly, holding the assets offline and obtaining appropriate insurance.

However, what if the company entered into a cryptocurrency transaction, but the asset isn’t held within its wallet?

Just with the dissipation of physical assets or cash, the transfer of cryptocurrency away from the estate could be considered an antecedent transaction. Further investigation would be required, as with any other claim, to review whether the IP can substantiate a claim to an evidential standard to successfully claw back the assets for the benefit of the estate. 

How can cryptocurrency be realised once it has been successfully recovered?

It is important to note that much, like fiat currency, all exchanges have their own conversion rate.  Because there is no interbank offer rate, there is no standard for what that conversion rate is. As we have seen in the last year, the rate has fluctuated drastically, much to the investors’ delight.

To mitigate any criticisms and ensure the best price is being achieved for the asset, it would be prudent to compare exchanges and conversion rates. Another option would be to place the cryptocurrency into an auction, which has an element of protection for the IP from any potential criticism as the value is simply the highest bid, rather than an exchange.

Given the increase in use and popularity of cryptocurrency, it is likely we will continue to see a huge investment shift towards it, particularly now with the backing of so many blue-chip companies.

It is not the fraudsters’ friend, as it can sometimes be thought, and is traceable if you have the skills and know-how in dealing with it.

IPs and other finance professionals need to embrace the move toward cryptocurrency as a more prevalent asset class and look to expand their training and understanding of the toolkits available to them, whether that is through normal recovery action of an asset or the tracing of assets leading to a claim for the benefit of the estate.

How members in business marry new technology with legacy systems

Posted by & filed under Members in business.

The limitations of legacy systems often put the brakes on efforts to modernise business processes. Here AAT members in business share how they approach the problem.

One of the biggest challenges of bringing new technology into the finance function is making it work with the older, more established systems and processes that you have in place. For many, it won’t be possible to start from scratch and create new systems and processes from the ground up. In that case, it needs to work with the legacy systems that you have in place.

Any technological enhancements also need to work for the business and provide real value to the organisation in order to deliver a return on investment. Finance leaders need to make a strong business case to free up the funds necessary to invest in software and implement it effectively. 

We asked accountants in business how they combine modern and legacy systems, what a successful business case looks like, the common objections and the best approach to tackle them.

Sometimes, the old ways are necessary

Clare Elliott FMAAT, CFO, ILUX

We use Xero as our accounting software and Fathom, which links with Xero, and you can get your metrics and drivers through there. I use that to review what’s happening in the business and I try to use them for forecasting as well. But we actually still use spreadsheets to put together presentations and graphs. I still think that spreadsheets are amazing for forecasting. We also have a piece of bespoke software, which does all of our workflows for our technical team. That does generate statistics and reports, so we use that to set targets and monitor our metrics as well.

Working with a standalone piece of software on your desktop or server felt really clunky. To update it, you had to wait for the providers to come in and help you and would typically always go wrong. You had to leave half a day to do a simple update. So switching to the cloud has been fantastic. You don’t even need to think about your software anymore.

Xero isn’t great as an accountancy package compared to the approach that I’ve used before. or other systems, but I think the advantages outweigh the disadvantages.

At the end of the day, new software is an overhead and that has to be a consideration. I used to work in a printing company, which was very much paper-based, but sometimes it’s very difficult for a piece of software to replace a piece of paper. You need to really understand what benefits it’s going to bring to your business. If it isn’t bringing benefits, don’t invest in it.

You have to prove the efficiencies, and speed of information it can bring to the table as well; getting your month-end reporting done more quickly, you can create dashboards. We have a dashboard that the other two directors can look at whenever they want. Our cash position is more up to date nowadays than it ever was before.

Directors just want to know what the situation is. Can we make a decision on this? Can I get a new person? They want quick decisions. They don’t want the nitty-gritty details, they trust you to do that. They just want to know that snapshot. Especially in a small business, it’s all about moving fast and making those really important decisions.

Focus on the ‘P’s to get the investment you need.

Neil Lawrence FMAAT, head of accounting, Hamilton Boyd Group

Finance has become a data-driven centre, which includes communicating with the wider organisation, both in reporting and streamlining processes (automation or becoming more adaptable, for example).

We need to ensure that enhancements provide extra value for the needs of the department as well as the needs of the company. This could be through time-saving, enhancing your team’s skills, or saving money. Even something that may be seen as a negative by the decision-makers must be presented in a positive way (replacing a system with one that costs more will cut time spent on making reports, for example).

When making a business case, be aware of any implications that any proposed changes may have on other departments by consulting with them on the initial phase. This helps anticipate any questions that may arise from the decision-makers.

Focus on the P’s:

  • Prepare: Understand where you are and where you need or want to be
  • Plan: Work out what you need and how you will get there
  • Present: Get appropriate agreement from management
  • Procure: Obtain the resources you need (time; software; staff)
  • Produce
  • Pressurise: Stress-test your new process or system
  • Publish: Once completely satisfied, train staff and release

When this works well, the way Finance is viewed by the rest of the company will change, and the skills and exposure both you and your team will get will only improve.  And that can only enhance everyone’s view of the business.

You must tackle the reluctance of staff to change

Sanjiv Bhali, senior project accountant, A2Dominion

We need to streamline our processes. Technology must keep up and evolve with new changes. The problem is that finance teams are used to utilising legacy systems and are resistant to change.


How do you make the business case? Identify the current purpose of the legacy system and the processes used. Can these processes be streamlined and accelerated and are there new processes as the organisation grows?

Identify what new system is required to fulfil these changes and evaluate the advantages of achieving this, including preparing common design and functional design documents and presentations.

The common objection that you get is where individuals are hesitant to use new systems because of change. The best approaches are to consider all the needs of the users and provide an adequate training plan to deliver to the users to fulfil their needs.

Why Football Index failed to find the net

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By blurring the line between gambling and investment, Football Index created a business model which caused it unsustainable liabilities.

Launched in 2015, Football Index was marketed as a “football stock market” and soon became popular with fans across the UK. It was, however, operating under a licence from the Gambling Commission, rather than the Financial Conduct Authority, which oversees investment products.

In its appearance, language and marketing, though, Football Index operated as an investment platform.

The platform allowed users to buy “shares” in football stars, which would rise and fall depending on the players’ form. Those shares would earn “dividends” over the three-year term of their bet, and users could buy and sell “shares” between themselves, for a 2% transaction fee.

The shares, though, were bets. Blurring this line was a major issue for Football Index. There were concerns, too, over its business model, particularly around its deliberate aping of investment products. The Guardian reported in March this year that the Gambling Commission was concerned the presentation led to “irresponsible gambling behaviour from… users misled into believing they are investing rather than gambling”.

Football Index’s liabilities – the dividends it was obliged to pay on shares – increase every time a share was purchased. The Gambling Commission estimated liabilities exceeded £1m per month in January 2020, and “the only way the company can afford this long-term is through the constant sale of yet more shares to new users alongside a constant churn in positions”.

“Should user growth stop or decline, the company would quickly find itself unable to pay these liabilities to users,” it added.

Football Index claimed to have around 500,000 account holders, and estimates of the amount of money trapped in the exchange when it collapsed ranged from £60m to £90m. It ceased trading and appointed administrators from Begbies Traynor in March 2021.

One analyst told The Guardian that a significant secondary element of Football Index’s failure was miscalculating how good its customers would be at picking successful players. They overwhelmingly favoured high-performing players like Harry Kane, over players at mid-table and relegation-threatened teams. In essence, customers chose players likely to generate them high returns, rather than the players who would make Football Index money.

There are two key lessons from Football Index’s collapse.

The first is to be clear about your business model.

Bookmakers generally face time-limited bets and can adjust their odds. Longer-term bets require extremely sophisticated modelling, and when customers homed in on more successful players that paid out higher returns, the only way to cover the costs was to bring in more customers.

The second lesson is that, without enough cash reserves, it created a situation in which it had to pursue new customers in order to meet its liabilities. It just didn’t add up.

“Should user growth stop or decline, the company would quickly find itself unable to pay these liabilities to users.”

Photo courtesy of iStock.