The lesson I’ll never forget – Paul Shields

Posted by & filed under In business.

At the beginning of his career, Paul Shields fudged a transaction to balance an account. It created a chain of errors. 

Paul Shields is an associate partner at MHA Tait Walker and heads up the firm’s Durham office here we talk to him about why it’s not worth cutting corners at work.

Cutting corners

I had been working at my first accountancy job for three months back in 1998 when I made a big mistake. I was 18 at the time, and I was doing a lot of manual work, which involved working with incomplete records and bank statements, reconciling accounts. It was a laborious task. On the day before breaking up for Christmas, I had been working on a relatively long project. It was late, and I was eager to get home. I tried to reconcile the account, but the bank didn’t balance.

Taking the easy route

I remember thinking at the time that it would be easier if I could get the account to balance before Christmas rather than having to come back to more work. In hindsight, I should have spent an extra hour on the night to get it done properly.  Instead, I put through a new transaction to get it to balance. I can easily pick it up again once I came back after Christmas, I thought. 

Chain of errors 

When I came back, I couldn’t remember what balance I’d put through, so it floated through to the next week. Everything I did after that didn’t balance. The natural flow of work at that time meant that once you’d finished one area, you’d move onto a different area to reconcile. Because of the transaction, I’d put in, every other control account I looked at showed errors. I ended up having to start the whole project again, which took about a week to complete.

Trying to take shortcuts cost us a week’s worth of work later on down the line. In the end, I came clean to my manager. Luckily, he was pretty relaxed about it and was impressed with my honesty in admitting my error. Ultimately, however, I had to fix it, so I got my head down and sorted it out. It was a massive lesson for me. It taught me not to take shortcuts – my shortcut came back to bite me pretty hard.  

Shortcuts aren’t the answer 

It’s a lesson that has always stuck with me. I use it as an example of how not to do things with the trainees I supervise at work. It’s a great message for them; why it’s essential to get things right the first time. It can be very tempting to take shortcuts, especially if you’re stressed and have a lot of work to do, but it’s more important to take a step back and do things properly.

Particularly before you’ve understood how everything in accountancy works. It’s no good trying to be smart by doing things quickly. It’s more important to get the initial assignment right first time; otherwise, it will affect other areas, as I found to my detriment.   

Further reading:

Travelex shows the importance of arming yourself with cybersecurity

Posted by & filed under Cyber security, Members, Run your business.

Cybercriminals are smart enough to take down a bank, and they are targetting small business. Are equipped to defeat them?

This week, Travelex hit the headlines after being held to ransom by hackers. It was forced to take its entire business offline while it dealt with the ransomware attack. It is the latest in a growing line of major names to be successfully attacked by hackers and digital criminals.

However, it is actually small businesses who are increasingly being targeted by cybercriminals. They’re often the weak link in a chain of businesses because they don’t have robust security measures in place.

Which shows the very real need to put practices in place to prevent security breaches.

Free cyber security guide

Check out the latest 5 things you need to do to protect your small business.

Download now

Cyber security series

If you’re a self-employed licensed accountant or bookkeeper, or you run your own accountancy practice, you might assume international criminals aren’t interested in your computer system. But your data, and your customers, is extremely valuable, and a data breach could cause you huge financial and reputation damage.

According to the latest Hiscox Cyber Readiness Report, 61% of firms have reported one or more cyber-attacks in the past year. Among firms reporting attacks, average losses associated with all cyber incidents have risen from £180,000 last year to £291,000.

A guide to keeping your data safe

The National Cyber Security Centre has just updated its Small Business Guide with the latest on how to protect yourself against cyber attacks. It covers all aspects of data security for SMEs, including:

  • backing up data
  • keeping computers, laptops and smartphones safe
  • protecting against malware and phishing attacks
  • and using better passwords.

It’s important for SMEs, licensed practitioners and sole traders to be aware of the simple steps they can take to protect themselves. If you employ staff, even part-time, it’s essential that they’re following the guidelines, as many data breaches are due to simple human error.

Why data security matters to small businesses

Criminals are out to exploit any weakness in your security systems and SMEs can be targetted because they offer a route into other, larger, organisations, says Del Heppenstall, Cyber & Data Privacy Partner at KPMG UK.

The weak link in the supply chain

“Phishing, ransomware, malware – SMEs will receive these attacks indiscriminately,” he says. “Cybercriminals now do their own investigations and look at where an organisation is in the supply chain. They try to identify businesses that might be providing services to a bigger party. In this way, SMEs are often seen as a route into bigger organisations.”

This might take the form of accessing your inbox and sending malicious emails to clients, who will trust the email because it appears to come from you. It might also cause you reputational and financial damage as a result, he says.

“Data breaches happen to companies of all shapes and sizes — they just don’t make the headlines,” says Bruce Penson, managing Director of Pro Drive IT. “Your accountancy business is just as, if not more, likely to be targeted as larger organisations.”

Fonts of valuable data with minimal security

As an accountancy practice, you hold masses and masses of personal data. And without the resources of the big companies, you’re unlikely to have very robust security measures. Cyber criminals know this.

“In the underground world of the dark web, it’s not just money that criminals are after,” he says. “Data is extremely valuable too. So, if hackers can find a more straightforward way to access it, why wouldn’t they use it? Unfortunately, businesses like yours are often seen as an easy and highly attractive target.”

Financial and reputational damage

It’s a big issue and one that could cost your practice dearly — both financially and in terms of your reputation, he says. Plus, since the introduction of more stringent laws under GDPR, government advertising and several highly publicised cases, your clients will want to know their data is safe with you.

“When it comes to cyber security, SMEs are the soft underbelly of the business world,” Paul Rose, CISO at Six Degrees. “In fact, SMEs are becoming an increasingly lucrative target for hackers. Social engineering and CEO fraud are a big problem, as SMEs often don’t have the same level of governance in place as large enterprises. And SMEs may also be targeted for their connections to a larger company – third-party suppliers are often the weak link in an organisation’s cyber security chain.”

So how do you protect yourself?

The first step is to acknowledge that the risk is real, and increasing, says Paul Rose. Then complete a risk assessment and create a cyber security strategy.

After that, provide training to all staff so that they know how to deal with incidents. Make sure you have a plan if the worse happens and you need to respond to an incident, or put business continuity plans in place.

Read on for Part 2

And find out about likely threats, and the National Cyber Security Centre’s key steps to cyber security

How local authority finance teams are turning into entrepreneurs

Posted by & filed under In business.

While Local Authorities across the country feel the pinch when it comes to funding, Eastleigh used property management to plug the gap.

In 2011, Hampshire Cricket Club was in trouble. Its ground, the Rose Bowl (now the Ageas Bowl), was losing £900k a year, and there was a risk that the club would go into liquidation. An unlikely saviour was at hand, however: Eastleigh Borough Council stepped in with nearly £40m to buy the ground and build a hotel on the site.

“We could see this wonderful 170-acre site with all these marvellous opportunities, not realising its full potential,” says Nick Tustian, then chief financial officer (CFO) and now CEO of the council. An evaluation suggested the investment could be worth 500 new jobs and bring about £50m worth of direct and indirect economic benefit to the area. In straight financial terms, the purchase – made with borrowed money – has paid off: the council now receives a surplus of more than £2m a year from the ground.

A strong investment

Eastleigh Borough Council began its programme of buying up properties in 2008. Initially, says CEO Nick Tustian, its focus was on purchasing properties that came up for sale in the borough as part of the authority’s regeneration plans for the town centre. “It very quickly came to our attention that property prices were relatively low and that there were some strong rental yields out there,” he says.

Some companies were desperate to make money from property sales, and the favourable borrowing terms offered by the Public Works Loan Board (PWLB) made the purchases a good investment. “We could buy some strategic properties that could help with our regeneration and our employment aspirations.”

The properties bought through loans from the PWLB and inter-authority lending include a Marks and Spencer and an old nightclub that’s now a successful Travelodge hotel. Initially, the net yield was 7% a year; now it’s 4.5%. Altogether, the council has borrowed £200m and is seeing an annual surplus of £9m from its £260m property portfolio, enabling it to keep council tax static in real terms. “Our property income is now worth more than our council tax and business rates combined,” says Tustian. 

Ditching bureaucracy

The programme required the authority to rethink its processes: “We had to change a lot of our bureaucratic rules. For example, we don’t require formal cabinet approval to progress a purchase – the leader and I have delegated powers to do that, so we are quickly in the marketplace. We learnt the biggest thing of all – market intelligence. We started to understand the market we were in, and we started to gain confidence from agents to the point where they were contacting us to say, ‘We’ve got property – are you interested?’”

An investment decision, Tustian says, is never merely about the bottom line – it is always informed by longer-term strategic objectives, such as creating jobs. He stresses the care and planning that goes into each decision. Each property is assessed on “whole life costing, the strength of the covenant, the strength of the lease and potential opportunities for redeveloping the site in the future,” he says. “For every ten we assessed, we probably purchased one.”

In summary

Eastleigh has no plans to scale back its property investments. It plans to enter the housing development market, purchasing a £150m plot of land on the outskirts of the town. It will be an “exemplary development,” says Tustian, with a strategic network of roads and cycleways. “We want to be able to demonstrate that we can do all the things that councils want to do in terms of planning by making this sort of development – and we will make a profit as well.” 

Further reading:

Study tips: Advanced aspects of Management Accounting

Posted by & filed under Advanced Diploma, Students, Study tips.

The first article of our series on some of the trickiest areas at Advanced level.

Study Tips: Advanced Level series

We’re going to work through a business scenario to illustrate how the AAT Advanced Diploma in Accounting can be applied, in practice, to the typical day-to-day tasks of a part-qualified Accounting Technician.

Let’s join Lewis in the accounts department at Gorgeous Threads & Co, a clothing manufacture, where he is part of a small finance team and deals with all aspects of bookkeeping and accounting.

Yesterday Lewis’s colleague complied the actual figures for the organisation’s overheads and both the labour and machine hours worked for the last quarter (1).  Today it’s Lewis’s job to calculate any over or under absorption.

Calculating over or under absorption

Gorgeous Threads work with spreadsheets because they can be used flexibly by a number of members in a team and adjusted easily.

Everyone in the finance team is expected to demonstrate competent accounting knowledge and precise spreadsheet skills simultaneously, to ensure that the spreadsheet functions used achieve the accounting tasks required. However, in order to do that, everyone has to be meticulous about following instructions regarding formatting and using formulas, as mistakes at the start of tasks have implications for later functions and requirements which can be time consuming to go back and correct.

Lewis received the spreadsheet below from his colleague:

Download your  AAT Advanced Synoptic Series – Part 1 spreadsheet to replicate Lewis’s tasks.

Correcting the spreadsheet formatting

Before he can start calculating the over or under absorption he needs to correct the formatting, as his colleague hasn’t followed guidelines about the nature of the numbers in the cells. 

Those showing the quantity of hours are appropriate, but the cells containing the overheads should be formatted to currency.

Lewis highlights the two cells, reformats them to currency and then reduces the decimal places to only show whole numbers as that is the organisation’s policy when calculating overheads. 

He looks up the overhead absorption rates (OAR) for Quarter 1 and adds them to the spreadsheet, adjusting the column widths and formatting the cells appropriately:

Next he checks how each profit centre recovers its overheads and finds Apparel Manufacture use direct machine hours and Accessories Manufacture use direct labour hours.

Calculating the overheads that have been absorbed

Now Lewis can calculate the overheads that will have been absorbed in Quarter 1. He must use a formula to comply with Gorgeous Threads’ requirements.

To help him write the correct formula he first thinks about:

  1. The accounting theory – as Apparel Manufacture absorb overheads using direct machine hours then for every direct machine hour worked, £28 will have been added to sales invoices and consequently recovered from customers.
  2. What he would do on a calculator – multiple the number of direct machine hours by the OAR.

Having done the first profit centre, it’s tempting to drag the formula to the right in order to quickly replicate it for Accessories Manufacture.

This would result in a formula of =C3*C6 replicating the row numbers and replacing the column letters and is really useful when the calculations in a row are the same across a number of columns ie. relative. 

However, in this case Lewis can’t do that because Accessories Manufacture use labour not machine hours so the formula needed to calculate how much overhead was absorbed is not relative to Apparel Manufacture’s. 

Instead he needs =C2*C6

Gorgeous Threads require IF statements to be used to calculate over and under absorption. Before starting, Lewis again thinks about:

  1. The accounting theory – over absorption is when enough money has been absorbed to cover the actual overheads incurred and have some left. Under absorption is the opposite.
  2. The spreadsheet function – an IF statement is an instruction to give one of two possible outcomes depending on whether a statement is true or false. In other words, IF the overheads absorbed are more than the actual overheads, then it’s over absorption, if not, it’s under absorption.

Using the function argument

Lewis uses the function argument box to help him write functions. 

In the case of IF statements, it breaks the function down into three sections and automatically adds any punctuation required. Lewis has found this approach, coupled with thinking through the accounting and spreadsheet theory first, makes his production of complete and accurate IF statements more successful:

Having written the IF statement Lewis now manually checks it has produced the result he expected. 

He knows that £236,656 has been absorbed and that this is not enough to cover the actual overheads of £259,354 so the IF statement should return an outcome of “Under”.

It does, so he is happy the function is correct. Because the same calculation is required in the next column, this time he can drag it across as the cells are relative, which will save him time and ensure consistency.

Lewis tidies up the formatting by realigning the cells containing the IF statements to the right, and then adds another row to calculate the amount of under and over absorption:

Minimising variances

The owners of Gorgeous Threads know that there will always be a degree of over and under absorption as OARs are calculated on budgeted figures. 

However, the organisation aims to minimise variances so has a policy that variances of more than 5% should be reported to the Finance Manager for investigation.

Lewis’s penultimate task is to calculate the amount of under or over absorption as a percentage of the actual overheads, formatted as a percentage to two decimal places:

Using conditional formatting

Now he can use conditional formatting to see if either variance needs investigating. To do this he:

  1. Highlights the two cells showing the under/over percentages
  2. From the Home tab, pulls down the Conditional Formatting menu
  3. Hovers over Highlight Cells Rules and selects Between…
  4. Types -5% in box 1 and 5% in box 2 then select ‘Green fill and text’ from box 3
  5. Presses OK

This highlights that Accessories Manufacture are within the 5% tolerance and that Apparel Manufacture are not and therefore Lewis will report this for investigation.

In summary

Lewis used to find spreadsheets challenging due to the quantity and variety of tasks and functions they can be used for. Since he has started thinking accounting theory through, and relating it to spreadsheet functionality though, he has found it easier. In the next instalment he’ll be using more spreadsheets to tackle some financial accounting tasks.

*  To show formulas in cells rather than their results – click on the Formulas tab, then in the Formula Auditing section click on Show Formulas (you may have to hover over the icons to find it).  Once selected it changes the layout and formatting of the whole sheet but they will revert as soon as it is deselected.

Read the next article in the series now: Advanced aspects of financial accounting.

Browse the full range of AAT study support resources here

Is this the end of the road for variance analysis?

Posted by & filed under Accountancy resources.

Variance analysis has been a key tool in the arsenal of management accountants for the last century. But is it really as valuable as we think?

Steve Morlidge, experienced management accountant and business author, is not a fan of variance analysis. It isn’t valuable in the modern workplace, he says.

We have so much data available to us now that accountants could be offering a lot more in their analysis, he explains. Variance analysis tables don’t give much value to the managers it’s aimed at.

 “Just take one row, not all the tables that adorn your 660-page management reports that you impose on people every month. What’s the narrative, what is this telling us? Is this good or bad, are things getting better or worse? Let’s say the year-to-date revenue is below the budget, but it’s better than last year. So does that make it good or bad? Which is the best comparator?”

Morlidge believes that there are three main problems with variance analysis:

1. The information isn’t palatable

Finance professionals take what they’re doing for granted and don’t take the time to make the information palatable for others in the organisation. As a result, it’s rarely used to drive any real action, and persistent problems go unidentified.

2. The data points are limited

A limited number of data points are used to create the analysis, which doesn’t take into account additional information that might give it context. Without context, it’s hard to identify what the organisation should do to make improvements

3.It’s hard to read

Variance analysis tables run counterintuitively to the way our brains interpret data. “From an evolutionary perspective, our brains aren’t designed to deal with this stuff.”

So what’s the alternative?

Morlidge believes that accountants should do away with variance analysis altogether. More accountants are using data visualisations to help non-accountants interpret the data, but it doesn’t solve the problem of “noise” in the data, or take into account any context. It’s very easy to see patterns in the data that aren’t really there, says Morlidge: “A bit like when you look at the clouds in the sky and you see a face – that’s what happens to our brains when we see noise, we’re looking for patterns that might not be there.”

Moving annual totals

Morlidge recommends using a graph called a moving annual total, which is the total value of a variable – for example, sales – over the course of the previous 12 months. It’s a rolling annual sum, changing at the end of each month as new data is added to it. So simply put, the moving annual total for January 2020 would be January 2019 + February 2019 + March 2019 and so on. 

“If you do an average of anything, which is what it kind of is, you filter out noise,” says Morlidge. “Secondly, most of the seasonality we see in data has an annual cycle. So if you’re using a moving annual total, you’re filtering out the seasonality as well.” 

Morlidge argues that this makes it easy for everyone to see what’s going on. “If you understand what you’re doing, and you know how to construct graphs in a way that our brains can assimilate easily, it becomes really obvious what’s going on.”

Further accountancy resources:

Expert advice for every stage of your career

Posted by & filed under Career-boost.

Stuck in the wrong job? Desperate for a career change? Worried that your skills have vanished while on parental leave? Check out the tips shared by our careers experts below…

Thanks to digital disruption, the boom in flexible working and the gig economy, today the average person changes careers five-seven times during their lifetime. For those accountants settled into comfortable careers, it’s forced many to rethink their entire future…

Whatever your age or experience making career changes can be daunting. As part of our PowerUp on Careers campaign, we’ve amassed tips from careers experts for anybody facing such career conundrums.

Early stage – first five years in the workplace

Scenario 1: I haven’t got enough work experience

“When I got into accountancy, you needed a degree from a good university to get into the big four. Now, big accountancy firms recognise that the qualifications you have from university aren’t as important as your attitude once you’re in the job” says Simon Gray a professional recruiter and former KPMG accountant.

“There’s no shortage of work in the financial services right now,” says Matt Weston, managing director at financial recruitment firm Robert Half. “To get a foothold, promote your ‘trainability’ by showing that you’re enthusiastic and willing to learn. Today, many companies want that hunger and passion from new recruits.”

The big four accountancy firms are no exception.

Today, many of KPMG’s brightest young staffers aren’t just graduates fresh from university, but school-leavers too. Many have joined the company’s well-received KPMG360° apprenticeship scheme, which sees them working in different areas of the company while studying AAT qualifications.

“Those new recruits who display a real passion really stand out,” says Tizzy Blythin, KPMG’s head of professional qualifications and accreditations. “They are inquisitive, hungry to learn and take every opportunity thrown at then.”

Top tip: If you’re worried that your CV or LinkedIn profile lacks vocational experience, furnish it with financial know-how that you may have accumulated, such as overseeing the budget of a local charity, managing your family finances or running a part-time eBay business.

“Think about examples whereby you’ve added value outside the workplace,” says Weston. “Have you captained a team? Perhaps there’s a charity you’ve been involved with. Don’t think putting this information on your CV is trivial. It’s not: it demonstrates you’ve been proactive.”

Scenario 2: It’s impossible for me to get ahead as my bosses have no idea who I am

“A great way to get onto your boss’s radar is to find a recent tweet or blog they’ve written on LinkedIn, and then comment, like or share it,” says Gray.

As for the workplace, prepare to volunteer yourself for everything. “If you’re that person who offers help, whether it’s for business or social events or CSR, you’ll massively increase your prospects of developing within that organisation,” adds Gray. “Many younger people just want to blend in and sit back. Always aim to be that person at presentations with their hand up at the end.”

Top tip: Are you brilliant at blockchain? A TikTok talent-in-the-making? Then, being young and tech-savvy could boost your career progression. “The role of the accountant today isn’t like that of the bean-counter 20 years ago,” says Gray. “Today, firms are looking for business advisers who can navigate new technologies such as blockchain, cloud accounting or data analytics.

Mid-stage – 5-15 years in the workplace

Scenario 1: I’m not enjoying my job anymore

“Many people in this stage of their career get lost,” explains Gray. “They’ve done their job for a long time, are probably paid quite well, but something’s missing. They could be driving to work in the morning or travelling by bus and don’t feel remotely excited about the day ahead. If you don’t feel motivated or challenged, then it’s a clue you’ve probably outlived your current role. Unfortunately, not many people choose to listen to this voice…”

Quite often, the biggest barrier preventing people from pursuing a career they love is money: by the time they’ve worked for 15 years, many professionals have families and are, understandably, reluctant to retrain or accept a smaller salary.

However, as experts point out, it’s worth remembering that any short-term pain and uncertainty triggered by leaving your job could eventually be dwarfed by the financial rewards and happiness when the job succeeds.

Top tip: Even if you detest your day-to-day work, it’s worth staying temporarily put: there could be other opportunities at your company. Many people working for large firms are often unaware about potential jobs within their organisation.

Scenario 2: I’ve taken a career break to raise my kids, but have spent so long away from the workplace, I’m worried my skills have disappeared

An all-too-familiar problem for many AAT members. After spending a good decade-or-so building a career, many workers take time off to have children. Yet, the sleepless nights and nappies of parental leave can leave many accountants feeling that their skills have stagnated, or that their jobs may have disappeared when they return to their old companies.  

Executive coach Jo Emerson – who returned to studying as a 39-year-old single mother – recommends having a pep talk with yourself first. “Examine the tape running in your head,” she says. “If the tape is saying, ‘I haven’t worked in a long time and am out of the loop’, then you’ll have a tricky time. Challenge that tape: is what you’re saying really true?”

“Try to stay current with what’s happening in your sector,” adds Gray. “Can you upskill? Is there any CPD stuff you can keep up with as an accountant? Also, while you’re away, there’ll be new legislation and tech changes: subscribe to publications and visit conferences, so you can stay visible and engaged.”

“It’s not unusual for people who’ve taken a career break to feel that they aren’t relevant any more and that their skills are rusty,” says Weston. “But it’s worth remembering that the core skills that businesses want today are passion, personality and adaptability.”

Top tip: As Emerson points out, once you return to work, you may find you’ve been undervaluing any new skills you’ve picked up during your hiatus, such as multi-tasking and time management.

Mature – more than 15 years in the workplace

Scenario 1: I’d like to go freelance, possibly setting up my own company, but I’m afraid to take the risk

Having spent a couple of decades in your profession, it’s easy to daydream about a new life: one where there are no more soul-crushing commutes or horrible bosses, but sunny days working from a laptop in the garden instead. Could it really be time to become one of the UK’s 4.8m self-employed army?

To avoid the knockbacks that come with being freelance, Gray suggests finding your specialism first. “If you’ve worked this long, you will definitely have some transferable skills,” he says. “But don’t fall into the trap of believing you’ll get more opportunities by making yourself more flexible. Instead, if you’re, say, an accountant who’s an expert in international accounting standards, that could be your focus in the marketplace… “

Weston notes that Robert Half has seen a recent increase in freelance workers working within the finance industry: “In particular, there’s currently a strong market for interim workers [specialists who have usually worked in-house at manager level, but now work on time-limited projects usually ranging from three-12 months].

If you’re an expert in enterprise resource planning [ERP], then that’s also a big market at the moment because every company will move to the cloud in the next few years and change their ERP strategy as a result.”

“But only become an interim worker because you want to do it,” he warns. “And make sure you’re financially secure too. There won’t be a natural flow of work; you might have a fortnight without work occasionally.”

As retirement approaches

Scenario 1: I’d like to change jobs but am worried any future employers will be ageist

Recent ONS statistics showed that the number of over-70s still working has doubled within the last year; only 2.6 per cent of 50-64-year-olds are unemployed. It all suggests that ageist prejudice against older workers could (finally) be a thing of the past.

“There’s plenty of research to show people in their 50s and 60s can make valuable contributions to companies,” says Sarah Churchman, head of diversity, inclusion and wellbeing at PwC. “In professional services currently, when you see an older person, there’s an assumption they’re a partner or more senior, I think that could change over time… We are seeing more people stay on beyond the normal retirement age here. All companies need to take into account that people will be working for longer.”

If you still fear ageist HR professionals, it’s also worth remembering that entrepreneurs aged over 50 employ more people than startups run by younger executives. And should you crave a more radical career change, it’s also worth considering one of the many ‘encore jobs’, many in social impact sectors such as teaching, the environment or local communities.

“Never mention your age during the application process,” cautions Weston. “If a potential employer does ask how old you are, it’s really not appropriate. Today, many companies have a blind CV process [where the interviewer is given no information about the candidate’s age or educational background], which can help… If you see a job advertised, go for it. Don’t put any barriers on yourself.”

Scenario 2: I’d love to retrain but fear brain rot

Memory loss and deteriorating brain power is something many mature workers cite as a reason for not picking up new skills. But learning during the later stages of your career can not only enhance your wellbeing but improve your career prospects too.

“Lifelong learning is the best university,” says Gray. “Today when I attend digital marketing courses, there are many people in the room in their 50s and 60s. They’ve taken that first step. Get on Amazon and order some books, or log on to YouTube: there’s never been a better time for you to learn.”

Elżbieta Paldyna-Ahmet began studying AAT in 2014 as a 57-year-old. Today, she works as a business analyst for HMRC in Worthing, West Sussex. “I’ve found my years of experience has given me an advantage. Having previously run my own business, I knew how to manage people, keep costs down and have analytical skills… Learning shouldn’t finish at school/college/university. Throughout life, you’re always finding out something new. Make sure you challenge yourself whenever possible.”

In summary

Whether you’re on the first rung of the ladder or edging towards retirement, thanks to various schemes (ranging from ‘returnships’ to ‘encore jobs’ through to online educational resources) there’s never been a more opportune time to make changes should you find yourself at a career crossroads.

Further reading:

Facing your first exam: everything you need to know

Posted by & filed under Students.

Facing your first exam can be daunting – but it doesn’t need to be. Here’s everything you need to know to help you prepare.

Motivation

Many studies show that the most effective preparation starts with one question, “why am I studying this?” Motivations differ, and once you understand the “why”, the work becomes easier to manage. Congratulate yourself on a regular basis, make sure you have a positive message inside your head. It may need changing from “I can’t pass” to “I can pass” and “I am going to pass”. Repeat this message regularly.

Key tip: Change your attitude to “I can”, and remember why you are studying.

Preparing

Once you have this clear motivation, move on to “how”. Combine methods of studying – simply reading a book is a very passive process and little is learnt. Be an active student – practice questions, e-learning from AAT, explain a concept to an imaginary friend. If my dog could talk, his accounting knowledge would be exceptional!

You have study methods, now you need to combine them into a realistic study plan. At the start of each unit, work through your time scales and start studying early. Study plans should be flexible and fit around your life. Remember that nothing worth having comes easy – you need to commit to the learning – now we are back to your motivation. Consider using online study planners, there are some very good free models available.

AAT assessments are computer-based, make sure that you have practiced this and are aware of how the screens will look. AAT has plenty of practice assessments available, these should be a critical part of your revision strategy.

Key tip: Make a study plan and combine different study methods. Practice!

Booking

Every training centre will have different procedures for assessment booking, your tutor will support you to ensure that the booking process is smooth. There are things you can do to help. Make sure that your student membership is paid, and information is current, for example, a name change. Tell your training provider your AAT number.

Key tip: Keep your contact information up-to-date and ask your tutor for support.

Assessment day

Make sure you know where you are expected to be and when. Often assessments are in different locations – consider parking, traffic, etc. Think about your mobile phone, and your smartwatch. You need to take photo identification (with the correct name on it) with you to the assessment.

Key tip: Plan ahead to make sure you are in the right place at the right time.

Strategy for achieving

Make sure you arrive well rested after a good night’s sleep. Strategy before the assessment is personal. Consider a coffee and chat with friends, or sit quietly with revision notes for some reflective time. Whatever is the most effective method for you to get mentally ready, plan it and keep that clear motivation in your mind.

A positive mind frame as you approach each task is critical, occasionally a task will surprise you – that can become destabilising, creating a knock-on effect. A 60-second deep breathing exercise using basic meditation techniques is helpful here, but this only works if you have practised it before (search online to find out more information).

Key tip: Arrive at your assessment well-rested and with a positive attitude.

Results

Make sure you know in advance if you will receive your results on the day, or if they are marked by AAT and you will receive them in 6 weeks.

Whatever your result, your feedback and your feelings will help you achieve more in future.   Before you move on, spend a few minutes reviewing your results and how you felt. Did you feel time pressured? Did the language surprise you? Did you find the silence of an exam room stressful? All these reactions can guide you to better learning skills in future assessments.  

If you want more support to understand your reaction, talk to your tutor. They are there not just to help your technical learning and techniques, but to support you as a person to grow, learn and progress through your learning journey.

Key tip: Review your results and understand how you felt doing the assessment.

Summary

Your first exam doesn’t need to be stressful – use these tips to effectively prepare and reflect, and you can turn these into habits for future assessments. Most importantly, enjoy your learning and embrace the assessments as your opportunity to share the joy of accounting with your assessors. Go on to achieve the dream that has led you to start the AAT journey.

Further reading:

5 ways to make your business more cyber secure

Posted by & filed under Cyber security, Members, Run your business.

Cyber security series

This article continues our series on protecting your small business from cyber attacks, based on the latest advice from the National Cyber Security Centre. Head back to part 1 to read more on why data security should matter to small businesses, or read on for the threats you’re likely to face.

Cyber criminals are increasingly targetting small businesses. They’re seen as the soft underbelly of the financial world.

Free cyber security guide

Check out the latest 5 things you need to do to protect your small business.

Download now

What cyber threats are you likely to face?

“The cybersecurity threats experienced by small and medium enterprises are largely no different than those experienced in the public sector or by large global organisations,” says Tim Mackey, Principal Security Strategist, Synopsys CyRC (Cybersecurity Research Center).

So what form could a cyber security attack take?

Your clients could be targetted

Phishing, ransomware and infrastructure attacks rarely have a specific target in mind, making the success of those types of attacks fundamentally a numbers game, says Mackey.

“This is in contrast to an attack on the users and customers of a business. In targeting the user base, attackers must specifically invest in crafting an attack which looks like legitimate communication from the target to their users.”

“So while an IT organisation can design defensive measures against attacks targeting their employees and infrastructure, attacks targeting business operations are more problematic.”

You can alert your clients to the threat of phishing emails pretending to come from your business, but there’s no way to stop them being sent in the first place.

Cheap cloud services leave you vulnerable

There’s an emerging threat from small businesses that forego the traditional IT department in favour of cloud service.

“If those cloud services aren’t defending against the types of threats the organisation expects, then a false sense of security can be created,” warns Tim Mackey.

Holding you for ransom

Ransomware is another big threat which could completely prevent an organization from doing business, says Thomas Richards, principal consultant at Synopsys.

“This has proven to be a successful business model for cyber criminals, and not one they will likely give up in the short-term. Make sure all corporate data is backed up with a tested business continuity plan in place.”

People clicking things they shouldn’t

“It’s no secret that humans are the weakest link, but the recent Verizon Data Breaches Investigations Report, suggested that some 90% of breaches start with a phishing or social engineering attack,” says Jonathan Whitley, director for Northern Europe at WatchGuard Technologies.

“The other major user problem is stolen or weak passwords.”

NCSC: Key steps to cyber security

  1. Back up your data: Think about how much you rely on your business-critical data, such as customer details, quotes, orders, and payment details. Now imagine how long you would be able to operate without them. If you have backups of your data that you can quickly recover, you can’t be blackmailed by ransomware attacks.
  2. Protect your business from malware: Make sure you install and turn on antivirus software, guard against harmful apps, install security updates, and install a firewall.
  3. Keep your smartphones and tablets safe: Malware is just as much a threat as it is to your PCs. Don’t connect to the Internet using unknown wifi hotspots, and instead use your mobile 3G or 4G mobile network, which will have built-in security. 
  4. Use robust passwords: Make sure they can’t be guessed from information you have available on social networks.
  5. Avoid phishing attacks: Be aware that many threats come in the form of seemingly innocuous emails. You should configure your staff accounts in advance using the principle of ‘least privilege’. This means giving staff the lowest level of user rights required to perform their jobs, so if they are the victim of a phishing attack, the potential damage is reduced. 

In summary

Cyber criminals are constantly looking for weaknesses in your systems, but by training your staff to be careful of suspicious communications or emails, keeping up to date with software patches and making sure passwords are robust and secure, you can protect yourself against many of the common methods of attack.

Useful resources on cyber security:

Further reading on cyber security for your small business:

The things you need to know about the upcoming 5th Money Laundering Directive

Posted by & filed under Anti-money laundering.

New rules on Anti-Money Laundering are about to come into force on 10 January 2020. But what does it all mean?

Here, AAT looks at what the 5th Money Laundering Directive means for accountants.

Why the UK Government intends to adopt 5MLD despite Brexit

The UK is a major contributor in the fight against money laundering and terrorist financing, and despite Brexit, the UK has promised to abide by all existing and new European Union (EU) legislation. More than £90billion is estimated to be laundered illegally through the UK financial system each year, much of it using shell companies registered at Companies House. In response, anti‐money laundering law must constantly evolve, and legislative updates reflect the EU’s determination to keep pace.

5MLD is seen as a crucial tool in fighting tax evasion, money laundering and terrorist financing by increasing the overall transparency of economic and financial environments. By implementing 5MLD the UK will be making the other global financial centres aware of its intention to strengthen its integrity as a leading international financial centre and seeking continuous access to the EU markets.

How can members/organisations adapt 5MLD ahead of its transposition?

Accountants in practice are now well aware of the imminent extension to anti‐money laundering rules as set out in the Fifth Money Laundering Directive (5MLD)

But what are they and what steps should accountants now be taking to ensure that their game is sufficiently ‘upped’ in anticipation of what are sure to be much more robust procedures. However, before we explore what accountants should do in light of the imminent changes it is important to set the scene and explore why 5MLDs transposition is happening.

Without a doubt, the first simple step to take is to make sure that a suitable client risk assessment is in place and that staff are fully trained and knowledgeable of it. But what are the other changes in the pipeline aimed at tackling the growing issue of money laundering ‐ be that high end, with criminal gangs, posing a national security threat or at a lower level.

What are the proposed changes and the impact on the accountancy sector?

Here we take a look at some of the changes to expect and what they will mean, day‐to‐day, for accountants and how they can future‐proof their practices.

The first step is to understand the elements covered by the extension. It then follows that adequate client risk assessments are put in place, or procedures are tightened. Getting the right software in place to aid checks and ensure you are compliant is also a must.

It is not anticipated that the implementation of 5MLD will require major changes to organisations’ policies and procedures, much of the work should have been carried out in the lead to the enforcement of MLR 2017 on 26 June 2017.

However, in preparation for the enhanced measures being imposed by 5MLD when it becomes national law on 10 January 2020, it is recommended that organisations should be checking the efficacy of their current policies and procedures and looking at what actions need to be taken.

The key changes that need to be considered are as follows:

Extension of obliged entities

Firms providing both direct and indirect tax advice are now captured by the rules (e.g., repayment agents who act in the course of business as tax advisers, often referred to as High Volume Repayment Agents). With these sectors now formally classified as higher risk, firms currently operating within the regulated sector may need to consider how their risk appetite for working with entities within this new regulated sector may be affected.

Firms may need to consider the additional knowledge and/or controls to understand whether they are transacting in these areas and ensure they can conduct appropriate Customer Due Diligence checks because of this change. Firms should look at their control framework to ensure they give themselves enough time to implement any new changes.

Beneficial ownership

Another significant update within 5MLD relates to the need for additional transparency related to identifying beneficial owners of corporations. 5MLD extends beneficial ownership reporting requirements to any legal arrangement like a trust, and tax neutral trusts. Under 5MLD, member states will be required to identify beneficial owners and to maintain public registers of these. 5LMD also widens access to the central register of beneficial ownership to any person who can show a ‘legitimate interest’.

The UK has already adopted this measure, creating the register of Persons of Significant Control. Obliged entities will need to review their policies and procedures for collecting UBO data, and ensure they are effective. It is likely that obliged entities will be required to report any discrepancies identified when comparing their own checks against the public register.

Trust registration service

5MLD expands the scope of the Trust Registration Service (TRS), requiring trustees or accountants to register those trusts with the TRS, this includes Discretionary, Interest in Possession, Charitable, Employee Ownership and Bare Trusts. The new Directive will bring into its scope all UK express trusts, not just those with UK tax implications.

It will also apply to non-EU resident trusts which own UK land or property, or which have a “business relationship” with an entity in the UK such as solicitors, accountants or banks. There are no carve-outs, exemptions or minimum threshold requirements. This means that a much broader pool of charities will be caught by the registration requirement.

Enhanced due diligence

There is a new provision designed to create a common interpretation of what enhanced due diligence measures are, when conducting anti-money laundering checks on an entity from a high risk country. Accountants are advised to ensure when risk based approach indicates a higher level of money laundering risk, the appropriate checks are defined, implemented and in line with 5MLD.

Such checks will need to be in depth and explore the wider risk that can be encountered through associated entities or individuals, such as with PEPs. This focuses on high-risk countries, the list of which will be expanded to cover those with an increased risk of money laundering. Additional checks are required to assess sources of wealth, overseas transactions and businesses owned abroad.

Technological Advancements

5MLD extends CDD requirements for situations where the beneficial owner of a corporate customer cannot be identified. It recognises the growing trend for the use of digital identity and electronic verification in the customer onboarding process and mandates that electronic verification should be used wherever possible.

Whilst nothing in UK legislation currently precludes using electronic identification, its explicit addition to 5MLD should provide firms with greater clarity and comfort as to the acceptability of electronic identification tools but should also inevitably facilitate client onboarding as more firms incorporate such processes. Firms should consider whether they have the necessary technological infrastructure to support electronic identification and verification.

Companies House

When you take on a client, you must check that the client has filed details of the Persons with Significant Control with the registrar (i.e., Companies House) and report any discrepancies you identify. In response to evidence that Britain is being used by criminals across the globe to launder money, the Government recently unveiled plans for the biggest overhaul of Companies House ‐ the UK’s official register of companies and corporations ‐ in 170 years.

Law enforcement bodies believe that the system is being exploited to launder billions of pounds of cash each year. Under proposed 5MLD changes, Companies House will gain new powers to check the identities of individuals registering and controlling companies.

Law Enforcement Improvements

5MLD will bring with it the introduction of new national bank account registers. The aim of this is to enable the financial intelligence unit (FIU) to access all bank account information held in the UK. The FIU will be able to request this information even of a suspicious activity report has not been submitted.

The challenge for organisations will need to consider they have the right controls and process in place to deal with such requests from the FIU and who will be responsible for dealing with requests on a timely basis and on demand.

CCAB is working on updating the AML Guidance for the Accountancy Sector and members will be notified when it is published.

While firms will be required to be compliant with the new requirements from January 2020, AAT will take into account the shorth lead-in time firms have been given to implement all the new requirements in assessing the response to non-compliance identified. Each case will be assessed on its own merits.

Further reading on AML:

How to survive your first year as a manager

Posted by & filed under Career-boost.

Becoming the manager of a team can be a big change. There are lots of factors to take on board – the personality make-up of your team, delegating, building culture – the list goes on.

We asked managers from finance backgrounds to share their advice on leading a team – here are their top tips.

Be a motivator

A big issue for managers of all levels is ensuring that your team is motivated. A team that lacks motivation will not deliver. James Barker, the chief accountant at financial technology company Finastra, says he wasn’t a fan of a regimented approach to management but knew he needed to make an impact without ruffling too many feathers. “I preferred the idea that you succeed as a manager if your team is successful,” he says.

Don’t let your management style be driven just by results and accept there are some essential soft skills you need to get the best out of any team. A simple “thank you” can work wonders for getting people to go that extra mile.

Key tip: You succeed when your team succeeds. Recognise and appreciate the efforts of individuals as well as the group – say “thank you”.

Set clear goals

Dean McInnis, the credit risk analyst at small business finance solutions company Iwoca, says goals and targets must be challenging but achievable. “This could be general team targets or a certain number of tasks per day,” he says. “It could be other things, such as how people integrate into the team.”

He adds that at Iwoca, new starters are often given responsibility for organising social events. “When I started in management, I wanted to give people something to strive towards. I would sit down with them to figure out what it was they wanted to achieve.”

Key tip: When it comes to injecting energy into your department, set clear goals that everyone can measure, and communicate these goals effectively.

Create an open culture

Sarah Williams, director at business psychology consultancy Edgecumbe, says an open culture helps new managers build a complete team with a diverse mix of thinking styles and personality traits.

“The key to harnessing the power of this diversity is in creating an open, trusting, curious and collaborative culture that enables individuals to play to their natural strengths within the team.” Having an open culture where team members feel empowered and confident to make decisions and use their initiative will build trust in you as a manager.

Key tip: Build trust within your team. Use your own experience to nurture talent and demonstrate that the team is working as one to achieve broader organisational goals.

Don’t fear difficult conversations

One of the hardest parts of a management position is having difficult conversations – these might be about someone’s performance, attendance record or other behavioural issues in the workplace. “Your team member might be struggling if their job isn’t what they want to do in the long (or short) term,” says Adam Lancaster, finance manager at credit experts TotallyMoney.

“But unless you speak to them, you won’t know if there’s something you can change to get the best out of them.” The office is not always the best place to talk, Lancaster adds. “Sometimes it is better to take people out for a coffee and talk things through.” Always do your homework before a difficult meeting, avoid getting too emotional, and try and keep conversations confidential.

Key tip: You won’t know if there’s something you can change to get the best out of your team member unless you have a conversation. Take them out of the office to talk.

Be direct

As a manager, you should always be direct, up-front and honest with your team, says Dean McInnis, a credit risk analyst at small business finance solutions company Iwoca. “Don’t beat around the bush or try to sugarcoat things,” he says. “Be honest, fair and tell people exactly what it is that doesn’t work.”

Explain to your team (or team member) that you are trying to help and that you care about their development. “Always keep the idea in your head that you are there to help them improve,” says McInnis.

Key tip: Be honest, fair and tell your team (or team member) exactly what the issue is. Don’t beat around the bush or try to sugarcoat the situation.

Decipher different personalities

A team is a combination of people with different skills and personalities, so as a manager, you need to take time to understand what makes each member tick. “Ultimately you need to create a good working relationship with everyone who reports to you,” says Lois McCloud at Cirkle PR. “

You can do this partly by understanding people’s different personalities.” McCloud was introduced to the colour chart of personality types – green tends to mean you are accommodating and reliable, red is assertive and determined, blue is logical and structured and yellow is enthusiastic, impulsive and active. McCloud says a member of her team is red, which means she needs to be more direct and assertive with that person.

Key tip: Decipher your team’s personalities using the Personality Type Indicator Test and adjust your management style to suit each team member’s personality.

In summary

Moving into a management role is more than just a title change. We’ve put together a ‘how-to’ guide so you can hit the ground running and keep improving. Our free eBook, which you can download at the bottom of this article, will support you in your transition from employee to manager, and lead you on towards becoming a strong leader within your organisation.

Download our free eBook now; The new manager’s guide to leadership

Further reading on careers: