Study tips : valuation of raw materials – part 2 (advanced)

Posted by & filed under Advanced Diploma, Students.

In this two part series we’re going to look at valuation of raw materials for the AAT Advanced Diploma. 

Study Tips: Valuation of raw materials series

In this article, we’re looking at inventory valuation, specifically focusing on:

  • How to recognise which inventory method an organisation is using
  • How to calculate the new closing inventory balance when the method has changed
  • What the effects are on reported profits under each of the three different methods when purchase prices are changing

We covered the first two points in part one so will conclude by bringing together aspects of both financial and management accounting theory to look at how inventory valuation effects reported reports. 

In previous articles we have alluded to the relationship that exists between the costing and financial accounting systems within organisations. 

Inventory management and valuation is an area where they overlap because both systems use the same costs but in different ways and for different purposes. 

Ultimately they work together and one example of that is when closing inventory is valued at year-end and the overall figure included in the financial statements.

Catching up

In the last article we calculated the value of closing inventory for AGT4 under each of the three methods and the results were:

  • FIFO – £354
  • AVCO – £351.25
  • LIFO – £345

We can see FIFO is the highest, LIFO the lowest and AVCO in the middle. 

This is absolutely typical of what we would expect, in circumstances where prices are increasing, due to the assumptions each methods makes about the order in which issues are made.

We can confirm by checking the inventory record that prices have increased:

Therefore, we would expect issues made using FIFO to have the lowest total cost of the three methods and those issued under LIFO the highest. 

When we review the total costs of the issue on the 31st May, from the last article, the results match this expectation:

  • LIFO – £735
  • AVCO – £731.75
  • FIFO – £729

In summary, when prices are increasing, we can expect:

  • FIFO to issue at the lowest total cost and therefore have the highest closing inventory value
  • LIFO to be the opposite, issuing at the highest total cost which results in the lowest closing inventory value
  • AVCO to give costs and values in the middle

It is important to grasp this key area and to be clear that these expectations only apply when prices are rising.  That said, if you understand one method then you can apply your knowledge to the other methods, which is a better approach than trying to remember everything verbatim. 

Equally, the same approach works if we need to think about what happens when prices fall.  AVCO will still hold the middle ground. But FIFO and LIFO will switch, with FIFO then issuing at the highest total cost which would results in the lowest closing inventory value, and LIFO being the opposite.

Now we can predict how each method will value closing inventory in relation to each other and to price changes, we can look at what effect that has on reported profits.

Gross profit is simply the difference between the selling price of a product and the cost of that sale and it’s usually calculated in the top section of the statement of profit of loss (SoPL). 

Financial accounting principles and standards require the cost of sales calculation to take opening and closing inventory into account along with purchases.  It is in the cost of goods sold (COGS) calculation that the valuation of closing inventory, based on either LIFO, FIFO or AVCO, is included.

Let’s put our closing inventory into a SoPL extract that has been analysed to show the effect of each method on profits*

You can see the all the figures are the same for each method until we get to the closing inventory. 

The highest closing inventory results in the lowest COGS figure, which then produces the highest profit figure. 

When prices increase, this is the result we would expect; FIFO returning the highest profit figure, LIFO the lowest and AVCO in the middle.  Logically then, if prices fall we would expect to see this pattern reversed. 

Therefore, it is important to be mindful of which way purchase prices are changing and not just assume that they are going up.

That said, it is more likely that over time price will increase instead of decrease, even if they do fluctuate on the way. 

It is because of this generally assumed upward trend and its resultant effect to reduce profit, that LIFO is excluded under IAS2 as an inventory valuation method that can be used in the production of financial statements.

* Note, I have made up a sales price of £20 per unit just to illustrate the example.

Browse the full range of AAT study support resources here

Data analytics – 1 – what you need to know to get started

Posted by & filed under AATPowerUp, Data analytics, Digital skills.

Do you understand what data analytics really is, or just that it’s a hot topic you’d like to know more about?

Getting to grips with business analytics (to give it its other name) should be near the top of the “to do” list for most finance professionals. But a lot of accountants don’t actually know what analytics is and how it fits into the accounting and finance function.

So if that is you, then this first instalment of a 5 part series on Business Analytics is a perfect way to get started.

What is data analytics?

Simply put, analytics is a structured approach to data-driven problem solving. In the context of our work, it’s using data to build models that increase your insight, leading to better decision making, and added value to individuals, companies and organisations. 

The concept was first introduced to the world of business in the noughties, through the pioneering work of Thomas Davenport and Jeanne Harris. Their Harvard Business School book Competing on Analytics brought a largely academic subject to the world of business.

Analytics has become a competitive weapon due to increased processing power, huge reductions in IT storage costs, and the availability of usable data.

The shift has been so dramatic that some analysts have called data the new oil, pointing to huge performance gains and investment rewards if companies can extract it, transform it and use it to answer their most compelling questions. 

Netflix

Netflix uses data analytics rather than funding pilots in order to make decisions about new shows. It takes an analysis of which actors and directors customers passionately like and combines it with detailed data about scenes viewers watch compulsively or skip. This has enabled an 80% success rate for new shows and led to a string of major hits such as House of Cards and Stranger Things.

Reporting revolutionised

The core of what we do in accounting and finance is reporting: the structured presentation of transactional data so it is easy to understand. 

Then we have business intelligence (BI), the grown-up version of reporting. BI has created a stronger link between data and decision making by providing more information and clarity to the consumer.

BI includes elements of querying data, visualisation of data in dashboards and scorecards, and even new data from simple mathematical models (ie: driver-based budgets- see glossary).

Generally BI is limited to using historical data, basic maths and internal sources of data, that falls short of predictions and recommendation that could significantly impact decision making.

If BI is grown-up reporting, then analytics could be considered to be BI’s older sibling.

Analytics uses logic, reasoning, critical thinking and complex quantitative methods to create accurate predictions and recommendations. It goes beyond the presentation and query of internal data. It’s a focus on problem-solving and answering specific business questions, using new methods and relevant available data.  

Example: BDO

BDO uses data analytics to spot risk and fraud in the audit process, and as a way to improve business performance.

Analytics can help identify ways to save money and increase operational efficiencies, such as revising payment terms, reducing duplicate payments, or aggregating payments to the same vendor.

Different types of data analytics

There are four generally accepted types of analytics. Despite the new terminology, accounting and finance already deliver the two less complex, possibly less valuable, types.

1. Descriptive analytics: what happened?

Descriptive analytics answers the question: “what happened?” Most financial reporting teams would try to produce this on a frequent basis.

One example in retail could be informing a business unit manager of what their daily or weekly sales were, or what their top 10 products were, based on an analysis of average weekly revenue for each product group.

Descriptive analytics processes transactional data from multiple data sources, mostly internal, to give potentially valuable insights into past performance. But as previously stated, this information is only a status update; an indication that something is more or less than expected, without any further explanation or insight.

2. Diagnostic analytics: why did it happen?

In most financial reporting teams, this is your reason for being. The time you have available after producing period end reporting and analysis packs will be spent drilling down into data, finding exceptions or differences in trends and adding commentary to answer why whatever happened has happened. 

Following on from the previous retail example, you could drill down to product gross profit in each category to find out why they missed their net profit forecast, and review the forecast drivers to see why the outcome was different.

In analytics terms, neither diagnostic or descriptive analytics are considered to be hugely valuable to the problem solving process, so companies are looking for more.

3. Predictive analytics: what happens next?

Predictive analytics is used to create accurate estimates to help paint a picture of what is likely to happen.

It uses the business data normally found in descriptive analytics to detect patterns and exceptions to predict future trends, which makes it a valuable tool for forecasting. Predictive analytics is powered by machine learning.

Despite numerous advantages that predictive analytics brings, it is essential to understand that forecasting is just an estimate. Its accuracy depends highly on data quality and the stability of the environment, so it requires a careful treatment and continuous optimization.

By creating accurate analytics information, consumers can be more proactive in their decision making, to solve potential problems as the information is received.

4. Prescriptive analytics: what to do about it

This is the most valuable, taking predictions and making recommendations for the actions to take based on that prediction. 

This requires both historical internal data and external information, due to the nature of statistical algorithms. Prescriptive analytics uses sophisticated tools and technologies such as machine learning, business rules and algorithms. This makes it tricky to implement and manage. That is why, before deciding to adopt prescriptive analytics, a company should compare the required efforts to its expected value.

Where do data visualisations come in?

Data visualisation is relevant to all analytics. There is no point creating new data and insight if the one who will consume it cannot understand what is being presented.

Graphs and charts are visual methods of presenting data, but visualisation goes further.

Consider the way humans process information: how best to present complex data as fast as possible, rather than too much information buried in volumes of reports and spreadsheets.

Visualisation is designed to ensure quick, easy understanding of analytics, communicated in a standardised way. Identify areas that need attention or improvement and position them so people are drawn to them first, creating a flow of visual information based on the message the analytics provides. Consider the use of formats and colours.

As you can see, there are multiple concepts and methods to consider as you mature your analytics capability, but where does that leave our core tools – MS Excel and financial modelling?

Excel has basic data visualisation, but it also has a number of mathematical models that can be used to create predictions and new data. Add-ons like Power Pivot and BI are proving very popular and helpful when starting with analytics.

That said, with the advent of big data, an ever-growing number of data sources, and the computing power of specific analytics tools, Excel can only go so far.

Analytics is a natural next step for finance and accounting’s core capability. It can enable better decision making and finance business partnering within organisations. No matter where you are on your data journey, you are probably already doing some aspects of analytics, and through a shift to predictions and recommendations enabled by new talent and tools, you can become a data-driven problem-solver in your business.

Glossary

Data Visualisation is the term used to describe the way data is presented in an eye-catching way as fast as possible, as opposed to stark figures or noisy charts. It can help to engage any consumer of information and highlight patterns, trends and correlations that might not be as clear if presented poorly or in simple data.

Driver-based planning focuses on the factors that are most critical to powering the success of a business. Mathematical models are built to allow different scenarios to be simulated based on changes to these business drivers.

Machine Learning is the scientific study of algorithms and statistical models that computer systems use to effectively perform a specific task without using explicit instructions, relying on patterns and inference instead. It is seen as a subset of artificial intelligence. Eg: Look at historical payment trends to predict which customer will pay and when.

Methods and Tools; Some examples of Analytics programming languages include R and Python

Some examples of the data visualisation tools include SiSense, Tableau, Qlikview, Domo.

About the author:

Chris Argent has overseen digital finance transformation projects for Vodafone, Amazon and John Lewis. He is the founder of Generation CFO – an online resource for finance professionals.

Chris is a speaker at the 2019 AAT Annual Conference. Find out more here:
Annual conference

What employers look for when hiring an AAT apprentice

Posted by & filed under Apprentices, Career, Employers.

Tanya Hamilton, a partner at McBrides Accountants LLP, said the firm, who normally hire about two apprentices every year, look for “someone who has the willingness to learn, who is enthusiastic and has researched a bit about what they would be doing.”

The ideal candidate would be “adaptable” and “mature”, she added. “They’re very integrated into the team from day one so they form part of the team that’s working for that client,” explained Hamilton.

“They won’t necessarily be doing client facing work straight away, but they will quite quickly start dealing with emails. We’re always building them up to that point where they will be out working with clients but not put in the deep end working on their own.”

The benefit to McBrides was to find candidates “from a young, raw age, when they’re very willing to learn and very adaptable. I think they complement the team as they have a range of skill sets and generally their IT skills seem to be better than people who have been here for a while,” she said.

On the other side of the coin, apprentices benefit from “high level experience” and being full included in the team. “They get good training and good support,” said Hamilton.

How to seize the moment as an apprentice

AAT apprentice Damilare Oladunni found his current apprenticeship at Hays Recruitment through an “insight day”, where he was invited back for an interview.

But he described the initial search for an apprenticeship with the Leadership through Sport and Business Initiative as being a bit like “speed-dating.”

“A group of employers came to our office and they were in different rooms so you literally go and they ask you questions for ten minutes and then you go into the next room,” he said.

Becoming more than a student

Oladunni was attracted to Hays’ office environment, where he felt it would be easy to settle in. Two months on, he feels like he is “part of the team”, with his colleagues making sure he is included in all their activities.

“It’s an apprenticeship, but it’s not much different from a full-time job,” he said. Among the key skills he rates as important are professionalism and flexibility.

“There might be some jobs or tasks from your line manager that you don’t particularly want to do, but be open, do it anyway. You don’t know where a certain thing is going to lead to, or where that skill could take you,” he offered. “Be open to everything and just try your best, giving 100% every time.”

Oladunni advises other AAT students looking for an apprenticeship to seize every opportunity. “Everybody has their idea of where they want to work, but I would say be open to everything,” he said.
We can get to know each individual and give them the great career development support that they need

Why should you be the chosen one?

Oladunni is the first apprentice in his office. Other companies, however, have a regular intake of AAT apprentices, and view the scheme as highly beneficial to their work.

Miller Insurance Services LLP in London take on AAT apprentices as regularly as possible.

Verity Stroud, Learning and Development Advisor, said that the company looked for a candidate who “is motivated and has a clear sense of why they want the opportunity that we’re offering.”

“We’re interested in someone who has done their research and obviously thought about it, and looked around at the opportunities and can see that what we’re offering could be a good fit for them in terms of what they would be looking for in a role,” she added.

Stroud commented that the firm already viewed people who chose an apprenticeship over university as showing “an amount of mature single-mindedness”.

“At the moment it’s still not, alongside university, a firmly established alternative choice. I think it’s becoming so but depending on the level of career service that they get from schools and the influence that their parents might have, sometimes it can take quite a lot of maturity,” she said.

Benefits of apprenticeships

In terms of qualities in its apprentices, Miller looks for “raw potential as much as possible,” Stroud revealed.

A lengthy application procedure, involving online assignments, team tasks and interviews identify, communication, deductive reasoning, attention to detail and problem solving skills.

“Broadly we’re looking for people who have potential in those kinds of things that we look for from anybody that’s joining us, and an affinity to our values as well because they’re very important to us,” she said.

As with McBrides, apprentices who work for Miller are “a permanent member of the team from day one,” added Stroud.

The obvious benefit to the apprentice is that “they’re doing a very relevant qualification that’s well aligned to the skills, knowledge and behaviour that we need them to develop in the role,” she said.

“That’s what’s appealing about it, because they are growing and developing in a way that is aligned to what we need and obviously they get the industry recognised qualification as well,” said Stroud.

“It’s an enhanced package that they’re getting, so it’s accelerating their development.”

Life after apprenticeships

The company also strives to support the apprentice’s professional growth, she stressed. “We have a dedicated team..and because of our size – we are medium-sized organisation – we can get to know each individual and give them the great career development support that they need,” she said.

“We look after our people in terms of helping them to develop their career and also some of the benefits we offer. We’ve got a good work/life balance. We promote agile working so everyone has a laptop, which helps them have good flexibility around where they work,” Stroud added.

“So we have a whole package of what people might be looking for, and give the right opportunities and progression and flexibility that people often want.”

Read more on apprenticeships; If you’re an apprentice, or employ an apprentice within the accounting and finance industry, AAT encourage you to apply for The National Apprenticeship Awards.

Maintaining your skills while on maternity leave

Posted by & filed under Career, Skills.

Wonderful, terrifying, joyful, and exhausting: having a baby is a life-changing experience.

One thing it should not change, however, is your career potential.

Employment laws oblige your employer to keep you abreast of any changes that take place at your workplace while you are on maternity leave.

If you are worried about losing touch, there are also lots of ways to keep your skills up to date.

Making the most of maternity leave

Whatever length maternity leave you decide to take, here are some tips to help you come back to work on top of your game.

Keep reading

Reading newspapers, trade journals, and relevant websites is one of the easiest ways to stay on top of what is happening in your sector while you are off work.

It’s one of the steps Dr Lottie Ford, a consultant gastroenterologist at Western Sussex NHS Trust, has taken to keep her skills up to date during her seven-month maternity leave.

“I have been keeping up with medical journals and scientific publications, and doing some online learning,” she said.

Attend keeping-in-touch days

Under current laws, you can go in to work for up to 10 so-called keeping-in-touch days while you are on maternity leave. These can be used to attend key meetings or training sessions, or to ease your way back into work towards the end of your leave.

“I plan to do some keeping-in-touch days at the hospital to maintain my skills in endoscopic procedures such as colonoscopy,” Ford said.

However, keeping-in-touch days are optional: your employer does not have to offer them, but it cannot insist you attend them either.

“I feel very lucky that my – almost exclusively male – colleagues have been very supportive. They have kept me in the loop without putting any pressure on.” Ford said.

Recognise your new skill set

Becoming a parent will almost certainly mean you have to develop lots of new skills you can use to your advantage in the workplace.

“Motherhood has definitely made me more focused and more efficient,” said mum-of-three Annabel Andrewes, a legal counsel consultant at London-based Legal Edge, which provides legal services for small to medium-sized businesses.

Ford agrees. “The skills motherhood has given me include patience, resourcefulness, and the ability to better empathise with my patients and their families,” she added.

“I now understand what it means to worry about someone to the degree that you struggle to articulate your fears or rationalise your feelings.”

Consider a part-time course

You probably won’t have the time to think about doing much other than care for your baby during the first few months of maternity leave.

If you have opted to take longer off work, however, you may want to consider doing a part-time course to gain a new qualification or learn some new skills.

Just remember not to take too much on.

“While on a previous maternity leave I did a distance learning qualification – a diploma in post graduate medical education,” Ford said. “But in hindsight that was probably overdoing it a bit!”

Maternity leave: your rights

The law states that new mums must take at least two weeks off work after the birth. Beyond that, you can decide how much time you want or need.

The statutory maternity leave available to all pregnant employees is 52 weeks. This period is split into two parts: ordinary maternity leave lasting 26 weeks, and additional maternity leave, also set at 26 weeks.

Your employer is only obligated to pay you statutory maternity pay, which is worth 90% of your usual salary (before tax) for the first six weeks and £145.18 per week after that, for 33 weeks.

The exception is if you have a provision in your contract for enhanced, or contractual, maternity pay that is above the statutory rate.

Staying in the loop

Either way, employers are required to inform you of any relevant changes, such as promotion opportunities and social events.

“How the employee is kept up to date should be agreed between the employee and employer before maternity leave begins,” said employment law specialist Acas.

It is, however, worth bearing in mind your employer only has to allow you to return to the same job, under the same terms if your leave lasts for six months or less.

Beyond that, you may be offered a different role, albeit on similar terms.

Take a proper break

New skills are not the only way maternity leave can give you a professional edge. Sometimes time spent not thinking about your job can be a great way to get a fresh outlook.

“I do not believe having some time off for maternity leave diminishes our experience and skills,” Andrewes said.

“Most skills don’t evolve that radically in a year, so I don’t think we should worry as much as we do.

“It can be good to take a break and come back with a different perspective.”

How to smash through the skills ceiling

Posted by & filed under AAT news, Run your business.

Whatever industry employees work in, regular upskilling and training opportunities are required to succeed in the modern-day workplace.

Digital, financial and general business skills in particular are needed to grow workers and, in turn, help meet the changing needs of their employer.

As part of our AATPowerUp series, AAT has uncovered a wealth of evidence that there is a skills ceiling which is costing lower paid staff an average of £11,926 a year – the gap between those who receive regular upskilling and those who do not.

Every piece of evidence we found tells us that, where employees are not provided with the chance to upskill, this leads directly to substandard business productivity, low morale and poor retention of workers.

Yet investment in skills training has dropped by a quarter in the past decade, and while the Confederation of British Industry reports that four in five UK businesses expect to increase the number of higher-skilled roles over the coming years, two-thirds worry there will be a lack of sufficiently skilled people to fill them.

Why should businesses tackle the skills ceiling?

  • Upskilling provides many benefits to help tackle low productivity in the UK. A Happiness and Productivity study, commissioned by the University of Warwick, found that employees gain more confidence and autonomy through upskilling, resulting in a productivity uptick.
  • Flexible training options mean that businesses can focus on the exact areas that they require their workers to become more proficient at, a far cheaper alternative to recruiting someone externally who has skills in those areas.
  • The opportunity to learn new skills at work was identified as one of the most important factors in job satisfaction, according to a Boston Consulting Group of 200,000 people, meaning businesses are likely to retrain workers and attract high quality staff from elsewhere.
  • Employers can discover untapped potential in their staff, boosting their skill set and allowing them to take on extra responsibilities. The Social Mobility Commission found in January that training was more targeted at senior roles, with 30% of managers receiving training in the last quarter of 2018 compared to just 18% in more junior roles.
  • The economy would benefit to the tune of an astonishing £125 billion if the UK workforce was upskilled as a whole, according to the Centre for Social Justice.

Why should employees take the chance to break through the skills ceiling?

  • Retraining and upskilling is good for employee happiness and wellbeing.
  • Recent Linkedin research found that employees with opportunities to learn at work are 47% less likely to be stressed, 39% more likely to feel productive and successful, and 21% more likely to feel confident and happy.
  • Individuals can boost their earnings potential and increase their chances of moving into higher paying roles. The Open University report that 52% of businesses surveyed in their 2018 business barometer increased the salary on offer to recruit someone with the right skills.
  • UK workers want greater flexibility – and with this can come upskilling opportunities with instant practical benefits. A survey by Deloitte has found that 70% of employees wanted management to support work-life balance, while 60% wanted a range of flexible working options

Jack Welch, former CEO of General Electric, once commented:

“Before you become a leader, success is all about growing yourself. After you become a leader, success is about growing others.”

You can read the inspirational story of Richard Matthews, who upskilled with AAT qualifications to aid his employment with HMRC.

AAT is calling on employers to help break the skills ceiling through growing and investing in their employees, in order to enable them to contribute in the best possible way.

The benefits of autism in accountancy

Posted by & filed under Career.

Autism has been in the spotlight recently thanks to Autism Awareness Week in April, and it seems more and more employers are realising the advantages of having a truly neurodiverse workforce.

An estimated one in every 100 people are autistic, yet only 16% of autistic adults in the UK are in full-time employment.

Part of the problem is the lack of understanding around autism and other neurodiverse conditions.

While each person with ASD (Autism Spectrum Disorder) is unique, it’s fair to say that many autistic people may excel at accounting, IT or science, but that they may struggle more with the so-called soft skills and in social situations.

How businesses are expanding with a neurodiverse workforce

Thankfully, many forward-thinking businesses, such as IT giant SAP, Auticon multinational IT firm and KPMG, are bringing people with ASD to the fore.

SAP has pledged to employ 650 employees with ASD by 2020 as part of its neurodiversity programme and Auticon.

The multinational IT consultancy which only employs autistic adults, has been working with the likes of Virgin Group, KPMG and Channel 4 over the last few years.

The DiverseMinds conference about neurodiversity, took place in London earlier this year. Matthew Trerise, an autism and neurodiversity specialist and consultant, outlined the benefits that autistic people can bring to the workforce.

Namely, being able to focus intently on something for long periods of time, logical/analytical thinking, problem-solving, creativity, honesty and being able to look at something from a different perspective. “All of which can make people with ASD brilliant employees,” he said.

Benefits of autism and accountancy

Rosie Weldon, an autistic client accountant at Exchequer Accountancy, says being autistic has helped her in many aspects of her job, but that is has caused significant challenges in other areas of her life.

“Accountancy is based on rules and logic. Numbers are objective and my mind’s analytical nature thrives when I am working with them.

Tasks, such as reconciliations are like letting my innate need for everything to make sense and have a place to run free, to let my mind do what it wants to do all the time – analyse inputs, variables and details,” she notes.

However, Weldon, who also has her own blog about life as an autistic person, has found ASD to be a double-edged sword, as it were.

Challenges and skills

“The autistic traits that cause me challenges in other areas of my life have enhanced my skills as an accountant; straight to the point communication, the need to follow rules, a structured approach to tasks and exceptional attention to detail,” Weldon explains.

“I don’t engage in small talk because I do not know how, but being autistic has helped me develop strong relationships with colleagues and management that are based on trust and understanding. Their support has created loyalty.”

Adjusting the workplace to support autistic employees

In order to get the most out of neurodiverse employees’ however, employer’s might have to make a number of minor adjustments.

These include:

  • ensuring they have very clear and accessible communications systems
  • providing a structured working environment
  • sensory environmental adaptions, such as a quiet zone, noise cancelling headphones or low level lighting.

Trerise said that providing training on neurodiversity and different conditions could also help raise awareness of ASD and other conditions.

Focusing on the positives

Veronica Pullen, an autistic marketing specialist who used to run her own bookkeeping business, says she found her ability to focus intently on something a huge advantage.

“When I am in the zone, working on something, I can’t switch off from it until it is finished,” she notes.

“Something else I found was that my focus in bookkeeping was in the detail, rather than the big picture. So I would be hyper-focused on reconciling individual accounts, but find it a challenge to step away and look at the bigger picture of the accounts.”

Pullen was fine as long as she had certain ‘rules’ to follow.

“The most fun I had as a bookkeeper was at the account level, where there were rules to follow, and as long as everything was ‘right’, it would be correct,” she says.

It’s clear that there are still significant obstacles to overcome when it comes to embracing a fully neurodivergent workforce but some progress is being made.

As Roxanna Hobbs, founder of The Hobbs Consultancy, which specialises in diversity and inclusion, says:

“We have to welcome, accommodate and support a wider range of ‘normal’ and only then will we benefit from the extraordinary difference these diverse minds can bring.”

AAT has guidelines for the application of reasonable adjustments and special consideration in AAT assessments.

This allows awarding bodies and centres to make “appropriate reasonable adjustments to standard assessment arrangements, wherever this is required to enable access.”

If you need extra help with your AAT qualifications, AAT has an extensive range of study support for students, including practice assessments, careers advice and networking events.

What bookkeeping can do for your business

Posted by & filed under Run your business.

Bookkeepers can sometimes be seen as being inferior to accountants.

Bookkeeping ranked a lowly 10 out of the top 10 roles finance employers are looking for in 2019 in the latest Hays Salary & Recruiting Trends 2019 survey.

A good bookkeeper, however, can make or break a business.

Get yourself a good bookkeeper

Zoe Whitman, founder of But The Books bookkeeping firm, says one of main benefits of getting a good bookkeeper on board is the fact that they can help give clients back precious time they should be spending on their business.

“As well as giving business owners back their time, we give them peace of mind that an expert is dealing with their finances,” she says.

“We add value by giving clients expert insight into their figures and the story their numbers are able to tell them. We also identify the statistics and trends which help business owners make financial decisions.”

Benefits to small businesses

Small businesses can, says Whitman, take opposing views to their finances, but bookkeepers can help get them back on track.

“Some clients bury their heads in the sand about their finances until a pressing year end or tax return deadline. Others immediately accept that it’s too important to get wrong and come to us within weeks of getting started,” she notes.

They recently worked with one client who had been self-employed for many years but had never established a bookkeeping process she could stick to.

“She was invoicing clients using a word document and email system, but had found it hard to keep track of who had and hadn’t paid her,” says Whitman.

“As well as setting her up with QuickBooks and showing her how to use it, we reconciled her invoices against her bank statement and chased up the £8,000 or so of invoices which we found were outstanding.”

Offering a different perspective

In addition to reclaiming the debt, Whitman says they helped their client look at things from a different perspective. “We helped give her a bigger picture of her finances, and a sense of relief that everything was now under control and in safe hands,” she notes.

A good bookkeeper should, says Whitman, tailor their services to the specific needs of the business.

“Some need support with monthly bookkeeping or tax returns, while others need help setting up a system to stay on top of their bookkeeping,” she notes.

“They need to know what they can record, what expenses they can claim, while others might need more specialist advisory support with budgeting, forecasting and projecting their future financial position.”

Seeing potential financial crisis

Bookkeepers can also help alert business owners to upcoming financial matters.

“If a client is concerned about their cashflow for the coming months, we can build a cashflow forecast and flex it so that the client can see what different business decisions could mean for their future bank balance,” Whitman says.

The difference between accountants and bookkeepers

Martin Atkins, partner at PKF Francis Clark accountancy firm, says people all too often presume accountants are also good bookkeepers, but that that is not always the case.

“We have taken steps in recent times to employ bookkeepers as well as offering a training programme for bookkeeping qualifications, as the digital evolution of the accounting world is driving us to do so. Training people in-house is much more cost effective,” he notes.

Rachael Cobb, accounts manager at Page Kirk finance firm says having a well-informed bookkeeper is paramount to running a successful business.

“It helps business owners make commercial decisions based upon live details of their profitability for the year,” she notes. “They can then award themselves remuneration alongside making commercial decisions to potentially change business strategy before it’s too late. It can also help when it comes to reviewing year on year budgets and understanding the peaks and troughs of the business,” Cobb says.

Appreciating the value of bookkeepers

Ben Rendle, director at BR Accounting, says however that many accountants still undervalue bookkeeping. “I think it’s undervalued because it’s often the traditional starting point for many accounting careers,” he notes.

“Therefore it is seen as an area where it is relatively easy to fill roles and train people (often school leavers) on the job.”

Investing in a good bookkeeper should, however, be seen as a proactive and preventative measure.

“It’s the financial equivalent to the flu jab,” says Rendle. “Whilst having it doesn’t mean you are protected from the flu virus, if you are unlucky enough to get flu, the effects will be lessened. So if you want problems flagged early get a good bookkeeper.”

If you’re just starting out on your bookkeeping journey, it’s good to know what to expect, and prepare yourself to offer the best possible service.

Digital tools to help your business run faster and smoother

Posted by & filed under AATPowerUp, Run your business.

It’s not easy for anybody to keep up with the 21st-century revolution happening in the world and in business.

As part of our AATPowerUp series, we suggest the tools and apps to help you keep ahead of the game when running your business.

Investing in digital

Markets, opportunities and expectations are all evolving at a record pace.

But if you can invest a bit of time in learning about what digital tools are available, and how they could work to make your organisation smarter and faster, then the benefits to your business will be tenfold.

If being digital doesn’t come easily to you, then just remember that it won’t do to a lot of your competitor’s either, and if you can embrace it then it really will give you the edge.

It will be simpler for smaller businesses to adapt and introduce a tool or two at a time or begin to automate tasks.

Larger companies will need to put more planning in place to make changes but will see greater benefits in time and cost savings, the retention of staff and by being seen as leaders in the industry.

How businesses can use to stay ahead of the game

Tools for social media management

There is a huge variety of free and paid social media management tools.

These can help you with anything from scheduling and creating content for multiple accounts, to getting notifications for what’s being said about your brand or industry and tracking what’s working.

Start by trying one tool with the functionality that appeals to you the most.

Social media management tools to try:

  • Buffer

Buffer is very easy to use – just set up your schedule and start adding content.

  • SocialBee

SocialBee takes scheduling a few steps further by also helping you curate relevant content and letting you categorise it so you can see how many times you’ve posted different types.

  • Tweetdeck

Solely for Twitter – you can tweet from and monitor your accounts plus track topics, events, hashtags, searches and lists.

  • Meet Edgar

Meet Edgar makes it easy to schedule content, repost evergreen content and even writes variations of posts for you.

  • Hootsuite and Sprout Social

These are both more comprehensive tools suitable for large businesses who might have to manage lots of accounts.

You can pre-approve content by different users before it goes live and they have great dashboards for curating, monitoring and tracking.

Google Analytics

The best way to find out how much traffic you’re driving to your website from your social media channels is to use Google Analytics.

You can automate receiving reports on where people are coming from, what pages they’re visiting, how long they’re spending on them and you can measure return on investment on sales and other goals like form submissions, button clicks and downloads.

Productivity apps

Productivity apps are designed to help you to do more in less time.

Social media management tools count as productivity apps, but there are also tools for project management like:

Trello, for managing your time and to do lists like ToDoist, and to cut down on cumbersome email communications like Slack.

Banking apps

Setting up banking via a smartphone app will let you make one-off or regular payments to suppliers.

Pay salaries, check your balances and transfer money between your accounts all in a few seconds and completely securely.

Google for Work

By making your business Google for Work-based you will find that you will be able to work seamlessly across devices.

It will be much easier to collaborate with teams or clients as documents are stored online securely, they’re easily searchable and shareable, changes can be seen live and they’re auto-saved so you’ll never lose work again.

You can start using the Google software instantly and for free which includes email, calendars, instant chat, word processing, spreadsheets and presentations.

Email marketing and database management

Manage and segment your marketing databases so that you can target different groups of people who you have different relationships with more effectively with the appropriate content (for example customers versus prospects).

Use an email marketing platform like MailChimp to do this for free in a GDPR compliant way.

You can also use it to send beautifully designed emails, automate responses and track how well they’ve been received (with metrics like open rates and click-through rates.)

The key to using digital tools

These tools are effective for any size of business and are popular with startups, but are also being implemented by the largest of companies worldwide (Slack’s customers include Capital One, Ticketmaster and Airbnb).

The key to using digital tools to gain an unfair advantage is to choose the ones that will make the most difference to your business.

Don’t try and do too much at once but commit to implementation across your team once you’ve made the decision. The change will be hard at first but worthwhile in the long run.

Something else worth considering, can you run your business from your phone?

Top tips for studying accountancy

Posted by & filed under Students, Study tips.

Studying accountancy isn’t easy. Along with the numbers, there are a host of acronyms, terms and formulae that need to be learnt and memorised. In the first of a two-part post, AAT student Amanda Ward offers her tips for making sure you never forget what you’ve learnt.

Studying doesn’t necessarily mean sitting down and reading a book for hours and hours – there are more effective ways. I know it isn’t the most exciting way to spend a weekend, but it certainly doesn’t have to be boring. Far from it.

Here are some of my own study tips which will hopefully help you study effectively and pass your assessments.

Review notes regularly

If you’re in a tuition class, regularly review what you have learnt.

If you don’t, then you may find that as you get to the end of tuition you’ve forgotten what you learned on the first day.

In the week after your lesson, do any homework you’ve been assigned and try to summarise on a sheet of paper – this will also help when it comes to making revision notes.

Get a study buddy

Memorising information is never fun.

If you can buddy up with another AAT student, try testing each other on formulas and the advantages/disadvantages of different techniques.

For my Financial Statements assessment I produced a list of the IAS/IFRSes that I needed to know and discuss, handed it to family members, and at random moments during the day they had to give me the number of an IAS/IFRS.

I then had to recall what the standard was and explain it briefly.

Of course, your family may not understand accounting standards, but being able to recall information on the spot is good practice for when it comes to the assessment.

Don’t leave the remembering part until the day before your assessment either – keep looking at what you want to learn.

Key tip: Post-It notes on the bathroom mirror to look at when you brush your teeth in the morning and evening is a great way of learning a formula.

Memory techniques

Another good tip for remembering information is memory technique.

I recently attended a session on memory techniques and took away a very useful piece of information – we remember the bizarre.

Throughout my studies, I had a tutor who would use scenarios to explain concepts to us – some not always classroom appropriate, but I could definitely remember them in the assessment.

Create stories, your own examples, and be as creative as you like – whatever works for you. You don’t necessarily need to tell others what you use to learn things, as long as you remember them in the assessment.

Study in a quiet environment

In a perfect world we’d all have our own quiet space in which we can study free from distractions but that isn’t always possible. Studying at home may seem like a good idea but you’re surrounded by distractions.

Consider taking your books and studying at the local library instead. Many libraries have quiet study areas, and without a TV and no mobiles allowed your chances of concentrating are far greater.

Highlight key notes

Highlighters are your friend.

During the learning phase, highlight key points that you can easily come back to, and also highlight formulas that you’ll need to learn, as these are not always given in assessments.

Underline key words, make notes, and make anything that you think might be important stand out.

Pro forma – learn them

The key here is to keep practicing with questions until you become so used to writing them that you know how to layout your answer.

If you can learn the pro forma of the balance sheet (statement of financial position) and the profit and loss account (income statement) early on in your studies, you’ll be in a better position when it comes to Level 4.

If you want to go on to further accountancy study, these become absolutely vital as you’ll be expected to know these. Again, keep practicing the questions until it becomes second nature.

Read more on studying accountancy with AAT;

Browse the full range of AAT study support resources here

Presenting data – doing more in Excel with dynamic charts

Posted by & filed under AATPowerUp, Using Excel for Analytics.

Here we help you begin exploring data analytics by showing how you can use Excel to display dynamic data in powerful and professional ways.

What is a dynamic chart?

A dynamic chart is a way to create one chart that can be used to look at different views of a large data set.

It’s easy to create a standard chart in Excel using a wizard – especially when only a couple of metrics are involved.

But what if you have dozens of metrics to choose from? And what if you might need to analyse different time periods from dozens of columns?

The temptation might be to draw dozens of graphs – incredibly difficult to follow, and time consuming.

This is where a dynamic Excel chart is your friend.

What are some uses for a dynamic chart?

AATPowerUp

Have you ever seen the interactive dashboards in Google Analytics for websites? A single reporting chart can be used to analyse different aspects of website performance.

Dynamic charts work in a similar way.

Dynamic charts make it very easy to do ad hoc comparisons of data. The user can select up to three options and the chart will pull through the values automatically.

A dynamic chart also lets the user select which year they want to view (see above). So, if we have several years of data and only want to see a snapshot, we can select the relevant year from the dropdown. We have set it up so that the user can compare the selected year with the previous year.

What are the steps to create one?

The key to creating a dynamic chart lies in the way that the data is set up. In particular, it should be a single tranche, as per the diagram above.

It’s a good idea to extend the time period so that it includes the next three years from the outset. So, as our data set covers 2014-19, we have added 2020-22. This means that the person doing the data entry won’t have to come back to you each year to update the formulae.

There are three key stages in setting up a dynamic chart:

  • Creating the data-entry area: we specify the year and dropdowns for the values.
  • Setting up a mini data table: this uses the values from the dropdowns to pull the data from the main table.
  • Setting up the graphs, using the values in the mini data table.

Step 1: Creating the data-entry area

In this stage, we set up the interface so that the user can specify the years and create the dropdowns. For simplicity, we will keep everything on the same sheet.

In cells B28, B29 and B30, enter the values ‘Year’, ‘Option 1’ and ‘Option 2’. For simplicity, we’re going to do a dynamic chart that allows the user to compare two values. It could easily be extended to have additional values, however.

The next step is to set up a couple of named ranges called ‘Graph_Options’ and ‘Years’, respectively.

Named ranges can then be set up via the ‘Formulas’ ribbon on the main menu. Select ‘Name manager’ and ‘New name’. (This will appear
as ‘Define name’ on a Mac. Click the ‘+’ to create a new name.) In this case, the named range consists of the values in the range B6:B22, which
are the possible options for the graphs. If the cells B6:B22 are selected before ‘Name manager’ is selected, they automatically fill the ‘Refers
to’ section of the table.

We also need to set up one for the years. In this case, we need a blank area of the sheet, which the user won’t see (I often use a separate sheet), and we need to type in the consecutive values for the years. Start the values for the year from 2015, rather than 2014, as in the graph we are comparing one year with a previous year. So, when we select 2015, the previous year is 2014.

Now go back to the left-hand side of the sheet and use data validation to restrict the values that can be entered in cells D28 (for the year) and D29 and D30 for the graph options. This means that on these cells only values from the dropdown will be permitted.

Then use the dropdown to select the values. For now, we will select the values ‘2015’, ‘Actual Turnover’ and ‘Forecasted Monthly Turnover’. That completes the first stage.

Step 2: Setting up a mini data table

The mini data table uses the values from the dropdowns to pull the data from the main table.

The first stage in creating a data table is to create the monthly timeframe. Using the date function, enter the formula in cell D34. This sets up a link to 1 January of the selected previous year. So, if cell D28 has the value ‘2015’, then the formula above gives the value ‘1/1/2014’.

We now need the next 23 consecutive months in our formulae. Excel’s EOMONTH formula can be used to specify the end of a month whose value is stored in another cell. So, for example, if we have the date ‘23/04/2015’ in cell C12, then putting the formulae ‘D12=EOMONTH(C12,0)’ in D12 will return the value 30/04/2015 – the end of the current month. And, if we want the first of the next month, we just add one: ‘D12=EOMONTH(D12,0)+1’, which returns 1 May 2015.

So in cell E34 enter the formula ‘E34=EOMONTH (D34,0)+1’. Then in cell F34 enter ‘F34=EOMONTH (E34,0)+1’. Now we drag this latter formula to the right to complete the timeline, which should be 24 columns showing adjacent months. Altering the value in D28 will automatically adjust the values in the timeline.

The next step is to incorporate the two axes into the data table. These are just cell references to the values in cells B29 and B30. So, in cells B36 and B37 put ‘=D29’ and ‘=D30’ respectively.

The next step is the most challenging: populating the mini data table using the values from the axes and the timeline. We’ll use a combination of the OFFSET and MATCH functions to do this. The OFFSET function allows you to return cell values relative to an ‘anchor’ cell. The MATCH function returns the position of one value within another range.

Enter the formula in cell D36. This will be the intersection of the first month and first axis option in the data table. And now drag this formula across both axes of the timeline to complete the values in the data table.

If you use the dropdowns in cells D28, D29 and D30, then the data table should update automatically.

Step 3: Setting up the charts

This is the final part of the dynamic chart – actually creating the chart. Highlight the first row of the data table and insert a standard line chart. This is the first axis in our graph. We can click on the graph and select the data source to specify the second axis.

We now have a dynamic chart that allows us to select two rows from the main data table and compare.

About the author

Kapil Kapur is the director of Fingertips Intelligence, which helps companies obtain management information (a.k.a business intelligence) easily.