Dealing with related party loans Posted 11/06/2018 by Steve Collings & filed under Financial accounting and reporting. An issue that has become contentious since the introduction of FRS 102 is the treatment of loans that are entered into at below market rates and these are quite common among related parties, particularly in a group context where one group member may make a loan to another group member at below market rates of interest. Loans which are stated at a below market rate of interest or at zero rates of interest are common in groups, but they are also common in standalone entities where loans are provided to, say, a small business by the shareholders or family of the shareholders to provide working capital requirements. Loans with no formal terms attached In practice, it is not uncommon to see loans to/from a small company or an intra-group loan, which is unstructured (i.e. they do not have formal loan terms attached to them) and, therefore, FRS 102 would regard the loans as being repayable on demand. The consequence of this is that where the borrowing group member had previously recognised such a loan in long-term liabilities under old UK GAAP, it is recognised as current in FRS 102. Reclassifying a loan from long-term to current in the borrowing entity’s balance sheet will reduce net current assets, turn net current assets into net current liabilities or will increase net current liabilities. Understandably this creates nervousness by the directors of the borrowing company as it may have an impact on the company’s credit-rating (which may already be low). The other ‘workaround’ would be to make the loan a 53-week loan; although where, for example, the group is audited, the auditors will eventually ask questions as to what the substance of the arrangement actually is if the 53-week term just rolls on! Structured loans While many intra-group loans within a small group, or loans to/from director-shareholders in a small company are unstructured, this is not the case across the board. Keep in mind that a small company can have turnover of up to £10.2m, and hence it is likely that there will be some small groups or standalone entities which enter into such loans which do have formal terms attached to them. Where a loan is formalised and is below market rate or is interest-free, this will constitute a financing transaction. In a group situation, the group must measure the financial asset (in the lending group member’s books) and the financial liability (in the borrowing group member’s books) at present value using a rate of interest for a similar debt instrument; for example, a rate of interest which the bank would charge on an equivalent loan to the group member. Some practitioners acting for groups have asked what the point is in discounting such loans to present value because, at group level, the whole transaction is removed as all intra-group transactions must be eliminated for the purpose of the consolidation. While this is true, the separate financial statements of each individual group member which is a party to the formalised financing transaction must account for the off-rate loan using a market rate of interest for an equivalent loan. Hence, in a small group, where consolidated financial statements need not be prepared if the group takes up the exemption in the Companies Act (s 399, Companies Act 2006), the individual financial statements of the lending entity and the borrowing entity will reflect the effective interest in the loan. The difference between the present value of the loan and the transaction price is known as a ‘measurement difference’. The measurement difference is calculated as the difference between the transaction price of the loan (£350,000) and the present value (£319,629) which is £30,371 and must be reflected in the financial statements. This measurement difference is essentially a transfer of value from one entity (the parent) the another entity (the subsidiary). The measurement difference represents the value of the benefit which the borrowing group member is receiving because the shareholder (in this case, the parent) is providing it with a loan at below market rates (if it were to take out a loan with its bank, it would pay a higher amount of interest hence it is receiving a benefit by receiving a loan from the shareholder/parent). The measurement difference also reflects the substance of the arrangement which is that the parent is providing the company with implicit financing as well as the underlying loan through the reduced rate of interest. Accounting for the measurement difference When a measurement difference arises, it is accounted for as follows: In the above example, the parent company lent money to its subsidiary resulting in a measurement difference of £30,371. The entries in the individual accounts of the parent and subsidiary are as follows: In the parent’s books: £ Dr Loan debtor 319,629 Dr Cost of investment 30,371 Cr Cash at bank 350,000 In the subsidiary’s books: Dr Cash at bank 350,000 Cr Loan creditor 319,629 Cr Capital contribution 30,371 Small company loans It is fair to say that the accounting requirements of FRS 102 where loans and financing transactions are concerned have been a challenge for some. Prior to the amendments to FRS 102 through the triennial review, FRS 102 required all financing transactions to be measured at the present value of future payments discounted at a market rate of interest for a similar instrument. A financing transaction arises when payment is deferred beyond normal credit terms, or is financed at a rate of interest which is below market rate or at zero rates of interest. Feedback received by the FRC suggested there were concerns about these accounting treatments for companies at the smaller end of the scale. Small companies may receive financing from the director-shareholders, or family members of the director-shareholders, because commercial funding may be unavailable, or the rates of interest charged by the bank may be too high to justify taking out bank finance. This, in turn, means it is often difficult to arrive at an appropriate market rate of interest for a similar debt instrument. In May 2017, the FRC announced that a relief was made immediately available for small companies that receive a loan from a director who is also a shareholder, or from a person who is within a director’s group of close family members when that group contains at least one shareholder. The consequence of this rule is that if the loan is from a director who is not a shareholder in the small entity, and has no close family members who are shareholders, the loan will not qualify for the relief. The effect of this relief means that when a small company receives a loan from a director-shareholder or from a person who is within a director’s group of close family members when that group contains at least one shareholder, which is below market rate or at zero rates of interest (which these sorts of loans tend to be), the loan need not be discounted using a market rate of interest for a similar debt instrument. In other words, the loan can be recognised in the accounting records at cost (transaction price). The relief is available only to small companies (as defined in the Companies Act 2006) and small LLPs and the small company does not have to be reporting under Section 1A of FRS 102 to take advantage of the relief. It is not available for loans to a director from the small company; nor is it available for intra-group loans (even in a small group). Some practitioners are under the impression that the relief is available for all directors’ loans to, or from, a small company. This is not the case and care must be taken to ensure a sound understanding of the rule in this respect. Some practitioners have argued that the relief will have negligible effect given that such loans are often provided to the company with no formal terms in place; hence the loan is treated as repayable on demand which would avoid the need for discounting anyway. However, as noted above, some small companies do have formalised loans in place and as the thresholds were increased so that a small company can have a turnover level of up to £10.2 million, there are likely to be more of these formalised loans cropping up in practice as more medium-sized entities were reclassified as small. Related party disclosure It should be noted that when a director-shareholder, or close family member of that director, provides a loan to the small entity at below market rates of interest (or at zero rates of interest) which is material, the loan is caught by the related party disclosure provisions in paragraph 1AC.35 of Section 1A Small Entities. Hence the loan must be disclosed as a related party transaction on the grounds that it has not been concluded under normal market conditions. Paragraph 1AC.35 requires the following particulars to be disclosed: ‘(a) the amount of such transactions; (b) the nature of the related party relationship; and (c) other information about the transactions necessary for an understanding of the financial position of the small entity.’ The names of the transacting related parties need not be disclosed as FRS 102 instead requires the nature of the related party relationship to be disclosed.
The flexibility of a bookkeeping career Posted 11/05/2018 by Laura Oliver & filed under Career, Students. At school, bookkeeper Lindsay Gray FMAAT, found her favourite subjects were the complementary disciplines of maths and music. Her first foray into record-keeping came at a young age too, she says: “My dad owned his own business so I used to help him record cheques coming in and things like that.” Maintaining her interest in figures and analysis, after she left college Gray took on an administrative job and studied bookkeeping as an evening course. The idea of earning and learning appealed and led her to apply for an apprenticeship with a firm specialising in chartered accountancy and tax and business advice. You learn better with experience “I’m a firm believer that you do learn better with experience. I’ve met people who have gone to university, done exams without work experience and have then gone into working in a practice. They don’t always understand how to apply their knowledge to the workings of a firm,” she explains. “If you want to start out in bookkeeping it’s really useful to be able to work and gain experience while you are learning. It helps to give a better understanding of what you are learning if you are using it in everyday work and helps you learn it more quickly.” The bookkeeping appeal Gray completed her AAT qualifications and apprenticeship in 2008. She stayed on at the practice for a few years until the pull of a role more focused on bookkeeping became too strong: “My first practice was really good for an apprentice. You had your set clients who you did everything for, so I was doing VAT, accounts, corporation and personal tax, and bits of payroll. It gave me quite a broad spectrum of everything that goes into accounts and tax. “But I started thinking about the bits of the job that I liked more than others and it was working with numbers and using raw data.” Finding a place in the industry Following up a bookkeeping job lead from a friend, Gray joined Sweeting and Smedley where she now manages a team of four as the firm’s VAT and bookkeeping manager. She’s been working there for four-and-a-half years and while her initial role covered a fraction of the responsibilities she’d had at her previous firm, Gray was happy to focus on her strengths and the areas in which she most enjoyed working. Being a bookkeeper requires flexibility, both to problem solve for clients and to keep up-to-date with new technologies and rules and roles from HMRC that can affect your working practices. Gray says she loves producing management information for clients alongside their quarterly bookkeeping requirements: “It gives the client an idea of where their business is, where it’s going and how to grow it rather than just speaking to them on an annual basis.” I’m a firm believer that you do learn better with experience The importance of upskilling The firm deals with a lot of IT consultancy and marketing consultancy clients. It’s important for her to keep abreast of the latest software and technologies available for bookkeeping, especially as her clients are increasingly using mobile version themselves and will sometimes ask for advice on how to use it. The introduction of Making Tax Digital is the biggest forthcoming challenge for bookkeepers, she says: “That’s given the software providers a bit of a fun task for them and for us to understand how it will all work. You don’t have time to get bored at all with bookkeeping because it’s constantly changing and you have to keep up so that your clients get the benefit.” While this technological shift is perhaps the biggest change to occur in her career, training courses from the AAT and in specific software for bookkeeping have proved essential for keeping on top of it and anticipating what might come next. Ultimately, however, the change has been positive, says Gray: “The introduction of cloud-based software is forever introducing ideas that are making our lives as accountants and bookkeepers easier. “Information gets fed straight into the software which cuts out some of the time involved in manual entry, for example.” The rewards of supporting your team Reflecting on her apprenticeship and roles in bookkeeping, Gray says her 10 years of experience of dealing with different clients and solving different problems for them helps her to remain flexible and negotiate changing practices in the profession. “I’ve noticed with a couple of my team members if they get stuck on something and they can’t resolve it I will look at it and have done it after 20 minutes or so. I will be able to show them that it’s a problem-solving thing and it’s not something you can easily learn,” says Gray, who is now a Fellow Member of the AAT and enjoys supporting two of her team members that are currently studying for their AAT qualifications. “It’s something that you gain with experience because there are things that my clients say to me that I used to struggle with but that I can do now. Where I used to have my supervisor and mentor, now I’m the person my colleagues turn to.”
Launch list, best public sector firm – Newydd Posted 11/05/2018 by Christian Koch & filed under Career. In the latest issue of 20, we’ve saluted accounting firms that have shown a forward looking attitude to the evolving world of work, check out our Launch list of best public sector firms below. 1. Newydd Housing Association Welsh housing association that offers affordable homes for rent and sale to people in need. A ‘door’s-always-open’ approach to leadership, outstanding training schemes, plus a commitment to looking after the posture and lumbar-related issues of its staff. Llongyfarchiadau! (That’s ‘congratulations’ in Welsh) Elizabeth Lendering, finance and resources director, says: “Thank you! We’re overjoyed to win this award. I’m also very happy – I became an AAT member back in 1978.” What differentiates Newydd from other firms? ELIZABETH: Our openness. There’s no manager behind a closed door. Everything is open-plan, and people feel they’re listened to. On induction, everybody has a meeting with our chief executive, and we have monthly staff meetings. Apparently you’re also big on musculoskeletal health. How? ELIZABETH: We buy whatever equipment people need, whether it’s ergonomic keyboards or specialist chairs. We even have risers so people can work standing up. When new people start, we give them a medical. A therapist comes in to give massages and treatments, and we have staff dance classes. At the moment, we’ve got 100 Fitbits, so everybody’s competitively walking. An employee on Glassdoor said: “Few people leave, so chances of promotion are limited.” What’s stopping staff moving on? ELIZABETH: We have a low staff turnover. Staff enjoy working here. As for promotion, we have a healthy budget for training. If people do want to go off in another direction, we will provide training for them. Being a charity, do you offer volunteering opportunities? ELIZABETH: We have ‘Make A Difference Day’, which is community-based and has involved activities such as litter-picking. Whenever staff do charity events, we’ll sponsor them and match whatever they raise. What else explains your high employee retention? ELIZABETH: Staff can also set up their own clubs – we provide a sponsorship of £250. We’ll also put on and subsidise any activities staff want. Staff can also get vouchers giving 50% discounts at local restaurants and attractions. More info: www.newydd.co.uk 2. National Audit Office The parliamentary watchdog has a traineeship and internship scheme, which includes blog posts by graduates and school leavers. Its sixth-form Motiv8 Mentoring scheme has been well-received, along with its approach towards disability and inclusion. The work is genuinely interesting too: think keeping an eye on government spending, plus the in-the-news BBC audit. More info: www.nao.org.uk 3. Amnesty International Joining the finance department of this Nobel Prize-winning human rights charity can involve some overseas travel, as well as the personal satisfaction of working for such a crucial organisation. In Amnesty’s international accounting team, being involved with more than 70 countries ensures the work never gets boring. Employees get 37 days’ annual leave, too. More info: www.amnesty.org.uk 4. WWF (World Wide Fund for Nature) Around 350 people work for this conservation organisation, spread across offices in Surrey, Cardiff and Edinburgh. Appropriately for an environmental charity, sustainability is big: a sustainable finance team works with organisations to assess their environmental impact. The WWF is a global organisation, so there could be opportunities to work abroad. More info: www.wwf.org.uk 5. National Trust This heritage-protection charity offers fantastic benefits, such as five paid days’ volunteering a year, a staff card offering you and your family free admission to National Trust properties, and flexible e-learning. There’s also annualised hours, whereby you work 10 months and get two months off. More info: www.nationaltrust.org.uk
How to find your most effective time to study Posted 11/04/2018 by David Nunn & filed under Distance Learning Nov 2018, Students. Time can be our best friend or worst enemy. Most of us overestimate what we can do in day, but underestimate what we can do in a month or a year. So here’s the thing: by taking the initiative, we can turn time into an ally. A few simple adjustments are all that’s necessary to start getting the most out of the day. If you identify quiet moments and use them wisely, your studies as a distance learner can fit around even the busiest of schedules. Step 1: decide what’s important Do you actively plan your time? Most people don’t. Writing out a to-do list is not the same thing as intentionally deciding how much time you will devote to a particular goal or activity. “Most people don’t have a clue how many commitments they’ve signed up for and how much time they cost,” says David Allen, author of Getting Things Done: The Art of Stress-free Productivity. “They’re in a constant emergency mode, trying to solve problems as they happen. Instead, you need to sit down on a weekly basis to plan out your work so that deadlines don’t overwhelm you.” Solution 1 Keeping a time log is a good way to set priorities. During a typical work day, note down what you’re doing during specific time slots. The next day, rate each activity on a scale from one to three, with one indicating an activity that’s a great use of your time, and three representing time-wasting activities. Focus on moments you spend staring at your phone or aimlessly watching TV, and transform them into study time. Solution 2 Try the time management matrix. You basically take all the things you need or plan to do, and put them into one of four boxes. Urgent and important Important but not urgent Urgent but not important Neither important or urgent Box number one – urgent and important – are the tasks to which we give most of our attention. But the trouble is, we are at best reacting, and worst fire-fighting. It’s box 2 – containing the important stuff that doesn’t have to be done right away – where we can get the life changing breakthroughs. Because they don’t give instant gratification, we tend to ignore them. But this ‘box’ is usually home to networking, relationship-building, planning, preparation and the like. Read more about this time management approach. Step 2: pick your ideal study moment When are you at your best? Is this when you study? “Getting up earlier and spending an hour studying at the beginning of the day before going to work is one of the best strategies,” says Elizabeth Saunders, CEO of time management coaching company Real Life E. “Many think that studying after work is effective, but that isn’t always the case. The majority of people are really tired by the end of their work day, and that can make studying more difficult.” Solution If you can’t face getting up earlier in the morning, there are still some other hidden time pockets to turn into study time. You could devote one morning each weekend to your studies and go to a coffee shop or library to study for a few hours. Or maybe you’re one of those rare people who do function better after dark. All it takes to discover your best study time is a simple test to check if you’re a morning or evening person. Step 3: make time to relax Would you plan to study when you are drunk? Of course not. Then why would you arrange long study sessions when you are likely to be dog tired? A 2016 study by the University of New South Wales found that sleep deprivation can have the same negative effects on response speed and accuracy as being drunk. “Don’t work when you’re tired and don’t work excessively long hours. You won’t take in as much information, and you’ll just become more and more ineffective,” says Clare Evans, author of Time Management for Dummies. Solution Plan in time for relaxing and for diversions, as well as study. “With a more relaxed mind, you’ve got more energy and you’ll feel more effective when you’re studying,” says Evans. Step 4: say no If you can’t remember when you last had a quiet night in, consider whether you need to get better at saying no. It’s important to spend time with your friends and help them out when they need you, but if you’re left without time for yourself you run the risk of ending up without time to study. Don’t feel like you’re rejecting people by saying no and never get tricked into defending your choice. Solution If you find it hard to say no, change your body language to appear more confident. Stand up straight, speak clearly, make eye contact, and people will respect your decision. Step 5: imagine your future Finding and using hidden time takes persistence: you’ll need to keep making the right choices to create study time as you progress with your qualification. Solution If your phone or that new Netflix series are just too tempting, remember why you chose to pursue your qualification in the first place. Resource of the day Check out our successful study tips podcast series (part 1 of 3). Up Next: Support networks that actually work Browse the full range of AAT study support resources here
How accountants can protect themselves from data breaches Posted 11/02/2018 by Marianne Curphey & filed under Financial accounting and reporting, Students. Suffering a data breach at your practice can cause business disruption, professional embarrassment and loss of reputation. It will also mean many wasted hours trying to sort out your computer system, and could land you with a heavy fine. We look at the steps accountants can take to reduce their risk of being the victims of a cyber-attack. Awareness is key A recent Verizon Data Breaches Investigations Report suggested that 90% of data breaches start with a phishing or social engineering attack. Often these are designed to trick employees into clicking on a link in an email or text message, inadvertently downloading malware, spyware or a computer virus. Or they might receive a phone call or email request from their bank, important customer, or senior member of staff asking for a large invoice to be paid urgently, or a substantial cash transfer to be paid immediately. “By making employees smarter about attacks, they can become a human firewall and a good anti-phishing education programme can reduce click rates on malicious links from 40-50% down to below 10%,” says Jonathan Whitley, director for Northern Europe at WatchGuard Technologies. However, it can be hard to spot a malicious email. “Attackers are gathering more intelligence on their victims, friends and colleagues who interact with them,” he says. “There is also an increase in so-called CEO fraud where the attacker impersonates senior management. We need to change the culture in organisations around phishing. We need to move away from the blame culture, so it is OK to make a mistake and learn from it. It only takes one user to spot and report a phishing email to protect other users in the company and go from ‘zero to hero’!” Oz Alashe, CEO of cyber security awareness platform, CybSafe, says that educational theory, behavioural psychology, and cutting-edge technology should form the bedrock of how managers at accountancy practices train their staff to be alert and help keen their systems secure. “We know, for example, that training should be regular, and it’s well documented within educational psychology that people digest information better in smaller, regular bites,” he says. “Training should recognise that people learn in different ways.” Beware malware Cyber ransomware like Wannacry or Cryptolocker creates more damage in SMEs, says Gianluca Bisceglie, founder and CEO of Visyond cloud-based automated spreadsheet and presentation software. He says ransomware typically prevents users from accessing their system or personal files and demands a ransom payment in order to regain access. For SMEs this can be a major problem due to the absence of a security culture and expensive security countermeasures which bigger enterprises tend to invest in. “These types of attack are obviously more lucrative when targeting firms in financial services or accounting as they hold a lot of sensitive and valuable data – and the same types of attacks are carried out in both big and small companies,” he explains. “SMEs have to fill the technological and strategic gap and reach the same security levels of big companies although they may have limited budgets.” Even assuming cyberattacks are taken care of, there are human errors and distractions to deal with, especially in accounting and financial services (or the finance and strategy functions in general), where handling sensitive information is the norm. “The moment your sensitive spreadsheets or presentations are sent via email, you have no guarantee this is going to stay confidential,” he says. “You may have built a scenario for a client and accidentally share it with the wrong person or, simply, the role of that person may change over time.” Identity Management Another potential area of threat involves managing password security and closing down accounts when someone leaves. Ian Kilpatrick, EVP Cyber Security for Nuvias Group, says that if staff don’t have good cyber hygiene at home and at work, then companies are more likely to experience fraud and hacking. “There are many solutions available to provide testing and training – products which address phishing, for example, such as Knowbe4 and Phishline,” he says. “These regularly test users’ awareness of phishing and provide remediation training.” Security patches are vital Managers also need to ensure that security updates from vendors are patched onto their computer system. “Running a business without up-to-date security software is the same as leaving the windows to your office open overnight,” says Rory Duncan, Head of Security at Dimension Data. “Not everyone is going to be interested, but those looking to break in have had the hard work done for them.” He says patching and software updates are part of a small business’ armour against emerging threats because they fix the known vulnerabilities that hackers are looking to exploit. “From mobile phones to business applications, any systems holding sensitive company data must be protected by secure passwords,” he explains. “The rise of social media and vast number of logins has meant hackers can build a profile of an employee of a target organisation on services they access personally and begin to guess passwords.” If the hacker can work out your password on one site, they are in a much better position to gain access to your data or systems on other platforms. “While they might not be interested in the end-user data directly, they can use your system as a route into the larger business network, opening the door to more valuable data on customers and suppliers.” Protecting your data gives you a business advantage Bruce Penson, managing director of Business IT support company, Pro Drive IT, says it is competitive advantage to be viewed as a ‘safe company’. Your business can benefit from identifying ways to protect your equipment, reputation and customer information. “Cyber attacks are costly,” he says. “Apart from direct thefts, there’s cost involved in cleaning up affected systems. Getting things running again is another headache. For online customers, the dreaded ‘website server can’t be reached’ message signals consumer panic. For businesses relying on trust in trade, there’s a direct loss.” Deepak Prabhakara, CTO and founding engineer at data-driven cybersecurity platform Red Sift, says there are a number of technology solutions available to help SMEs and startups protect their networks as well as their customers’ data. “There is no one magic answer, instead a layered approach to security is the best line of defence – think malware detection, email security, encryption and anti-phishing technologies,” he says. Failing to protect data could land you with a heavy fine Under the new General Data Protection Regulation (GDPR) rules, which came into force this May, public bodies or organisations dealing with large amounts of sensitive data or systematic monitoring must have a Data Protection Officer who is responsible for reporting any breaches. GDPR governs the collection and processing of personal information of individuals within the European Union (EU). If a company doesn’t follow the rules or doesn’t report a data breach in the allotted time, they will be fined. Fines for breaching GDPR are significant: up to €20 million, or 4% annual global turnover for non-compliance, whichever is higher. Even when we are no longer part of the EU in 2019, any company that trades with the EU or has customers or business interests with an EU company, will be bound by these rules. Know which parts of the business are at risk Implementing an IT cyber security plan for your business can seem daunting, but it is really just a matter of getting expert advice, Bruce Penson says. Ask the experts what security controls and products you need to service your assets, information, and customer trading processes. Do you operate remote access to your servers and how should you secure that information? What regulatory compliance is necessary and in what part(s) of the world? Ensure your system is reviewed, or get an outside agency to monitor and act on any threats, regularly reviewing your cyber security. Expertise is vital, as your business expands. It does require regular strategic reviews, and an allocation of budget. Alastair Johnson, CEO and Founder of Nuggets, says security is not a one-off procedure that can be ‘done’ and forgotten about. “On the contrary, it’s a persistent and strategic understanding of systems and the various bugs, viruses and other attack vectors that can be gamed by malicious actors – remember that data held by businesses is incredibly valuable, so hackers are incentivised to get hold of it.” Fraud is now the UK’s most common criminal offence. That’s the startling finding from the Annual Fraud Indicator 2017, which reveals that fraud is costing the UK economy £190 billion a year. The study, compiled by Crowe Clark Whitehill, Experian and the Centre for Counter Fraud Studies at the University of Portsmouth, shows that private sector fraud costs the UK economy £140 billion, while fraud in the public sector is estimated to cost the country £40.4 billion in 2017. Six steps to security Chris Mallett, a cyber and data breach expert with AON, the global insurer, says the government’s most recent study into cyber security breaches showed nearly half of all SMEs have identified a cyber attack or breach in the last year. He says there are a few key steps that firms can take to protect themselves that don’t require significant investment in cyber security systems: Protect against malware – be it in the form of viruses, ransomware, keyloggers or rootkits – by installing anti-virus software that regularly scans your system for threats and prevents your employees downloading potentially harmful malware Have a firewall in place to control all points where cyber criminals could access your system, and prevent access to and from potentially malicious IP addresses Install manufacturer patches as soon as they become available – these patches are often issued by software manufacturers to protect against known weaknesses and vulnerabilities Vet your software suppliers to ensure that they put data security at the top of their agenda Develop a cyber-conscious culture – make sure all employees take data security seriously by avoiding easily decipherable passwords, correctly indexing data and double and triple-checking before they send data outside of your firm Consider purchasing a cyber insurance policy – even the most sophisticated cyber security doesn’t guarantee complete protection and if a breach does happen, cyber insurance provides access to a range of critical breach response services that help you meet regulatory requirements and keep your business running “By taking the sensible steps above, accountancy firms can protect against ever-increasing cyber risk without having to break the bank,” he says.
Are second languages becoming a recruitment priority? Posted 11/02/2018 by Sophie Cross & filed under Job hunting. Setting yourself apart from the competition is the aim of the game in business, and it begins when you apply for a job. You need to prove why you’ll be better than the other applicants at contributing to making the organisation better than its competitors. First and foremost employers are likely to be looking for qualifications that match the role requirements, and then some sort of relevant work experience. But as the labour market becomes more crowded, having the highest level of qualifications isn’t enough. And at this stage if you’re neck and neck with another candidate, or even slightly behind in the qualification or experience stakes, then you’ll need to delve into your box of tricks to give yourself competitive advantage. Second languages and international experience are moving higher up the recruitment priority list, particularly for companies with global reach. But even if the job doesn’t require you to speak in another language – international experience, and even being well travelled, can demonstrate great transferable skills. What transferable skills come from having second languages and international experience? Relationship building and communication An affinity to learn new things Cultural understanding Problem-solving Confidence and self-sufficiency Adaptability and flexibility The appeal to global companies For companies with offices, suppliers, and/or customers worldwide, the benefits of candidates speaking another language, or having the experience of, or desire to, work abroad become more obvious. Lastminute.com Group, are a truly global company, not only in the services that they provide, but also in how they work. It’s not uncommon for members of the same team to be split over three or four international offices. Stuart Bagnell, the Chief of Culture at Lastminute.com Group, shared his and the organisation’s motivations to work with staff who have these skills. “I believe that having international experience or a second language is of great benefit to global businesses – this is especially relevant for us within the travel industry. When looking for new talent, a cultural fit for a role is as important as finding the right skill set. With many companies becoming more flexible in remote working possibilities it can also open up a wider pool of talent from other countries that wasn’t previously available. However, this approach can bring its own set of challenges. Working with and understanding many different cultures can be complex at times, so it’s crucial for businesses to have a core set of values that really represent what they stand for and that can bring everyone together. Demonstrating empathy, which is positively linked to job performance, is especially important for leaders working in global businesses. Seeing that someone has travelled, lived or studied abroad means that they’ve had to navigate cultural boundaries and have taken the opportunity to understand people with a different perspective from their own. I’m also a big fan of the ERASMUS student exchange programme. It’s a concept we’ve adopted for the workplace at Lastminute.com Group to give people the opportunity to work with colleagues – giving our people the chance to learn, experience, and develop a different outlook on work and life.” Languages and international experience will help businesses expand their global market presence and give them access to a larger pool of talent if they are prepared to work flexibly. Lastminute.com Group use systems like Workplace by Facebook, Google Drive, Google Hangout to promote a culture of communication and teamwork, even when people are in different offices, or even countries. How you can expand your international experience If you’re focused on self-development and climbing the career ladder, then your CV should be continuously evolving. Improve the level of your other languages with apps like Duolingo or find your very own teacher with italki.com. Be open to working in international offices, especially in less sought after countries like China or India. Consider taking your studies abroad. Find out about other cultures when you travel and have authentic experiences. Get some overseas work experience, even if it’s just for a short period of time. Speak with friends and colleagues who have lived or worked abroad to find out about their experiences and make new international contacts. Choosing to work abroad for a long period can be a big decision, but there are plenty of ways to gain international experience without the huge commitment. And there’s little doubt that employers will be valuing these skills and experiences more and more as the business world continues to become increasingly globalised.
How to stop this unproductive way of studying Posted 11/02/2018 by David Nunn & filed under Distance Learning Nov 2018, Students. Today’s distance learning tip is about setting yourself up to avoid one of the most common, but unproductive, study methods. What do nine out of ten of students do immediately before an exam? Answer: cram It would be wrong to say cramming doesn’t work. But it is far less effective than most students think. And it often comes with a heavy price tag of creating extra stress and tiredness at exam time. Why cramming doesn’t work A study by University College, Los Angeles found that for 90% of students, cramming does not work well. Worse still, 72% of students actually felt like cramming was working better than it actually was. In short, they were deceiving themselves. When we attempt to memorise a lot of information our mind tends to pick up the beginning and end of a list, but will not store the middle. This means the majority of the information we need to learn and recall is forgotten shortly after. Our minds are also designed to forget. Imagine we remembered every item of clothing we ever wore? The amount of information would be quite staggering. And pointless. So our brains are careful about how they store things. Most information is assigned to short-term memory. That’s why three days after learning something, most of us will retain only 20%. Spaced repetition will help For 90% of students, spaced repetition of content will be much more effective than cramming – and the information is retained for longer. The idea is to review the information at carefully chosen intervals, just as we begin to forget it. That way it is easy to boost knowledge back towards 100%. Opinions vary on the optimum interval, so you will need to experiment. One popular approach is based on 2x2x2 formula: Review after one day Review two days after that Review four days after that, etc Here is another approach based on an algorithm by Piotr Wozniak – the developer of spaced repetition software, SuperMemo: review within 24-48hrs review by day 10 review by day 30 review by day 60 Difficult is the new easy When we review information, it’s best to review thoroughly and challenge ourselves. That way our brains are more likely to retain the information. Educationalists call this ‘desirable difficulty’, and it arises from the Levels of Processing theory. Put simply, the more deeply we think about information, the more our brains take note that it is important. And useful. And they take steps to encode it in our long-term memory. We are also more likely to learn by actively using information and concepts than passively reading or hearing about them. Three great ways to review information to avoid cramming Below are three methods of reviewing information that have been shown to be effective. 1. Mock assessments All AAT students know the value of mock assessments and practice questions. Try these under stress conditions. Time yourself and see which types of question you find easiest, and which you need to plan more time for. Check out AAT test questions to get started. 2. Elaborative interrogation Elaborative interrogation is a fancy way of saying: ask yourself questions in order to learn. Calling on information improves your ability to retrieve stored memories. Although it’s challenging, this is actually the point. Question the material you’re studying by asking: What is this? How does it work? Why does it work? What are the applications? Make a list of the concepts you need to learn, then write out questions to test and expand your comprehension. 3. Flash cards Flash cards are a high impact learning tool – and a great way for you to develop a deeper understanding of subjects. You can create your own set of flash cards, using simple online tools. To set you on your way, we’ve prepared flash cards to help you study on the go – see below. Resource of the day Flash cards are a great way for you to develop a deeper understanding of material. Download your pack now! Download Foundation Certificate in Accounting flash cards Download Professional Diploma in Accounting flash cards Download Advanced Diploma in Accounting flash cards Up Next: The way to remember more Browse the full range of AAT study support resources here
Launch list, best large firm – Deloitte UK Posted 10/31/2018 by Christian Koch & filed under Career. In the latest issue of 20, we’ve saluted accounting firms that have shown a forward looking attitude to the evolving world of work, check out our Launch list of best large firms below. 1. Deloitte UK – Over the past five years, this Big Four accountant has been creating a different kind of workplace Deloitte has a dynamic approach to recruitment and diversity, as well as using tech imaginatively. Emma Codd, managing partner for talent says “We’re excited and proud to have won this. What makes this important is the data sources the magazine has used, such as Glassdoor, which rates our people’s input on the company”. Why do you think Deloitte employees have such nice things to say about working there? EMMA: It’s our environment. Our people were telling us five years ago that work-life balance was a real issue. We did some data analysis and developed ‘agile working’, where we judge people on output [rather than hours worked]. We figure out what works for the individual and the business. It’s a real meeting of minds, and has been transformational. Deloitte has also done some great work on diversity. What measures do you have in place? EMMA: We’ve got specific action plans [for example, Deloitte has a commitment that, by 2020, 25% of its partners will be female, and by 2021, 10% of partners will be BAME] that we’re driving throughout the organisation. We’ve also got a big focus on LGBT+ and social mobility. You’ve also got a ‘university-blind’ recruitment. Tell us more. EMMA: Unconscious bias is most likely to occur at the CV-sifting phase. Why do we need to know what university or school somebody went to? We’ve made the decision to redact that information at the application process. Is it true Deloitte uses mobile phone games when recruiting? EMMA: Yes, we do use some gamification. It’s a popular way of engaging people during recruiting. One of the biggest things we look for in new recruits is problem solving ability. How else do you nurture talent? Emma: People stay at Deloitte because of the environment, and the opportunity we offer them to grow and develop. The thing that struck me when I joined the firm is how much support there is to develop skills that benefit you and the firm. Also, the buzz here is amazing. In our office, you’ll find people smiling. At Deloitte, people can be themselves; they bring themselves to work. More info: www.deloitte.com 2. Smith & Williamson In online reviews of this firm of auditors, which has 12 offices around the UK, employees rave about the “opportunity to progress your career” and secondment opportunities. More info: smithandwilliamson.com 3. PWC Big four giant or Silicon Valley start-up? Judging by PWC’s progressive workplace culture, you might assume the latter. Recent initiatives include adopting a ‘mobile-first’ culture with no more landlines, banning all-male job shortlists, ‘dress for your day’ code and ensuring that a quarter of all food served in the canteen is vegetarian/vegan. More info: www.pwc.co.uk 4. EY This big four stalwart has 247,000 staff – more than the population of Southampton – but makes each staff member feel valued. It’s one of the UK’s top gay friendly employers, has a well-received ‘Mental Health First Aid’ scheme and is recognised as being one of Britain’s best employers for working families. More info: www.ey.com 5. KPMG This is another accounting giant that positions itself at the forefront of workplace trends. In recent years, KPMG has sent staff to work in trendy co-working spaces, and shrunk its graduate recruitment process with its Launch Pad programme. The firm’s inclusive culture means it also organises celebrations for events such as Chinese New Year and Ramadan. More info: home.kpmg.com
Can you run your business from your smartphone? Posted 10/31/2018 by Marianne Curphey & filed under Run your business. Take any commuter train on a weekday morning or evening, and you’ll find most of the people on it are reading the news, browsing the web, answering emails or reading up on issues for work meetings. Smartphones have become an essential part of our working and personal lives. We are all part of a world that is always connected, and always ‘on call’. With the advances in technology, how much flexibility does new software, new apps and new approaches to business allow for new modes of working? Could it be possible to run your business purely from your smartphone? Your Smartphone – the solution to the curse of hotel WiFi If you travel regularly for work, you’ll be familiar with snail-pace hotel WiFi, insecure networks, and high charges for internet access. Often using the data on your smartphone or connecting your phone to your laptop or tablet can be a more reliable and safer way of being online. This is particularly true when you are abroad, where open networks can be a threat to the sensitive data on your laptop. New markets, geographical areas and opportunities for growth mean staff travel more frequently away from the office as a business expands. They will use potentially insecure guest and public networks. Patrick Clover, founder of BLACKBX, a Guest WiFi company, which has clients in the UK, Europe, in the US, South America and Asia, says managers need to think ahead to anticipate security risks while staff are on the road. What happens if a laptop goes missing – for example if you leave your bag in a hotel lobby and it is stolen? “Lost laptops are a big risk,” he says. “If someone has access to the company laptop, they have free rein to do what they want.” If you do have sensitive information on your phone, putting in a mobile device management system gives another level of security and control over standard administration, he says. It enables the IT department to disable phones, tablets and laptops remotely, if they are lost or stolen. Keeping up to date with social media If your company’s marketing strategy involves regular tweets, website updates, and blogs, then these are straightforward to manage via your mobile phone. “You can schedule social media posts from your phone and arrange for seven or eight different messages to be scheduled to be sent out over the week relating to that particular post,” says Liam Bateman, managing and founding director of The Think Tank. “All this can be done in advance. You can think about different topics and can schedule articles you have already written to be published at regular intervals over subsequent weeks.” Mobile phone apps such as, Hootsuite enable you to schedule, publish, and monitor social media conversations from anywhere. You can edit a scheduled post on the train or capture video at a conference, and post straight from your smartphone. Maintaining the company culture Another important issue is about maintaining culture and collaboration, says Nigel Davies, founder and CEO of digital workplace Claromentis. “Software today needs to support modern working practices,” he says. “The demand for flexible and remote working is on the rise, but some SMEs can’t see how to maintain their culture and enable people to collaborate on projects if they aren’t sitting beside each other. “Technology already has solutions to this – and they are mainstream. The main objective is to choose a software that integrates or brings all your business apps together. The digital workplace replicates the physical workplace by creating a centralised virtual space through which every employee can access apps and files and communicate rapidly. When everything is in one place, your people save time.” Your clients are already connected Many organisations are already running a large part of their business through phone apps. The landlord and property sector are leading the way on this. OpenRent, founded as an online letting agent in 2012, has technology which enables the entire lettings process to occur online, without a need for paper, cash or offices. “We allow landlords to book in viewings, calculate their property’s rental value, order referencing reports, sign contracts, renew tenancies for free, and much more, all from their smartphone,” says Sam Hurst of OpenRent. “With OpenRent supporting the entire letting process online, and most browsing happening on mobile, it has always been essential for OpenRent to work beautifully on a smartphone,” he says. “We have developed several features to make sure landlords can keep track while on the move, such as when on the way to viewings. “One piece of functionality we recently added is a Payment History page, where landlords can view all expenditure across all their properties – complete with receipts – on one simple page. This is incredibly helpful for landlords running their lettings portfolios, especially when it comes to keeping track of tax-deductibles.” Making technology personal Nathan Baranowski, Director of OJO solutions, says it is possible to run a business mostly using your smartphone. “From video conferencing, social media and a fully functional calendar to tools like Xero, Skitch and Citymapper, not to mention always being connected to emails, there isn’t much you can’t do through your smartphone for your business,” he says. “Designers can design, developers can test their apps and business owners can stay in touch with suppliers, staff and customers. This kind of tech provides solutions to challenges we have faced for years, and it’s only going to progress from here.” He does acknowledge that for an SME owner, being connected all the time “can be a blessing and a curse”. He adds: “When you run your own business and interact with customers on their journey so often, you rely on it.” Handheld devices do have their limitations, though for very detailed tasks. “For me, looking at spreadsheets is still a challenge,” he says. “Smartphones are great pretty on most things but sometimes some apps just aren’t quite right for mobile yet. A smartphone is perfect for when you’re on the move between meetings, but when taking notes and spending time with customers, more space and flexibility is key.” As technology is moving so quickly, we will be finding new ways of working in the future, he believes. “It will not be long before it is the norm to dock our phones into our desks and use big screens and keyboards,” he says. “Mobile security has never been as good as it is, and leveraging the cloud most likely makes your phone more secure than your laptop.” Risks and limitations However, there are limitations, especially for accountants who need a quiet place to work out detailed calculations, update complicated spreadsheets, and talk to clients about personal financial matters. It’s not practical to hold private conversations in public places, like a train or coffee shop, and for most people, trying to build a spreadsheet on a handheld device is frustrating and time consuming. Much of the software for accountants is not yet mobile-friendly, and is not really designed to be used out of the office. There’s also the issue of security – your clients need to know that data is kept safe and secure and can’t be stolen or hacked. Nick Thompson, Managing Director of DCSL Software, a software development agency, says running an entire business from a device with limited functionalities and a small screen isn’t possible. “The option to review and edit large documents, organise diaries or send long emails is there, but it’s more likely that mistakes will be made and it will take a long time. Additionally, it’s inherently difficult to look at a small screen for any length of time; it hurts your eyes, your neck and gives you a headache.” Although the capabilities of smartphones are forever increasing, there are still limitations, he says. “Productivity apps are emerging all the time, but at the moment they are still incomparable to the speed at which you can do things on a large screen with a keyboard.” Avoiding burnout Marc Trup founder of Arthur Online, property management solution, says that as SMEs are relatively less complex than larger organisations, there are usually cheap yet powerful online tools for almost every part of its operations, from managing accounts to interacting with customers in real-time. “The ability to communicate with customers 24/7 via smartphones is particularly useful for SME’s trying to build a reputation for excellent customer service, usually a determining factor of success,” he says. However, while these added capabilities may seem cost effective on the surface, the real cost is more accurately measured in overworking, added stress and health issues like eye strain. “Particularly vulnerable are entrepreneurs and their employees trying to establish themselves in a crowded market; as the option to do a little extra is always there, where do you draw the line if your competitors seemingly go that extra mile?” he says. Data protection is another concern, as apps are often less secure than web based versions. What’s more, smaller businesses are generally unable to afford the latest cybersecurity systems, making them more prone to hacks. Flexibility on the move For now, smartphone apps can make your life easier, enabling you to schedule meetings and reminders, hold contact details for clients, check your business and personal bank accounts and manage your business while abroad. When it comes to detailed financial analysis, security, and complicated tasks, a quiet room with a laptop is still essential. For owner-managers who are building their business, it is also important to weigh up the health issues of never taking down time, and always being available to clients. Building in breaks and time off at the weekend will help you return to work on Monday morning recharged and ready to go.
Meet the mentor: Chris Conway, Managing Director of Accounts and Legal Posted 10/30/2018 by Andrew Lowry & filed under Inspiring stories, Students. Continuing with our series of conversations between AAT students and inspirational accountants, Chris Conway, Managing Director of Accounts and Legal, shares lessons in leadership with Anna Gibbons. Both AAT student Anna Gibbons and Accounts and Legal managing director Chris Conway fell into accountancy by accident. Gibbons got a job at a mobility company, which gave her a taste of working in a finance team. She enjoyed it so much that she decided to study with AAT. “I’ve always liked the money side – the process and precision of it – and I guess it just appealed,” she says. What skills are needed to run your own business? Anna: How different is it coming into a management role at a smaller company compared to being in a large corporate environment? Chris: It’s totally different. You go from being a cog in a huge business – with your work divided project by project, depending on the client’s needs – to running the business itself, so the decisions you’re making change pretty radically. Anna: Did working at Kingston Smith prepare you for leadership? Chris: Yes and no. Obviously many of the core skills are there, including of course accountancy, but you take on all these other disciplines too. At Kingston Smith, we never had to worry about new business. It was all based on relationships. Now it’s a huge part of my job. I had no idea how to deal with, say, marketing. I had to learn. I never knew how many hooks you need to have in the ocean. How do you manage your team? Anna: How do you make sure you manage your team effectively? Chris: We have departmental meetings every Monday morning. You need to be engaged in every facet of the business so that you’re aware of what’s actually going on and so that staff feel engaged with the business and its goals. It’s so important not only to know what you need to know, but also to know what your team needs to know. Anna: What do you most enjoy about your work? Chris: I love developing people. Apprentices are worth their weight in gold. We have two in particular who are excellent, and always up for a challenge. Some people who come through the door think they know everything before they’ve done a day’s work, but clearly that’s not the case. Anna: You work with a lot of start-ups – I guess you can relate to them. What are the lessons there? Chris: Our situations are certainly similar in that you see a lot of people turning their hand to things that might be new to them. You see that time and time again in new businesses: the founders having to radically expand their skill sets. In an accountancy firm, you expect to be doing someone’s accounts, but that couldn’t be further from the truth. You need to add so many strings to your bow. Anna: Software takes care of a lot of things now anyway I guess? Chris: That’s why studying AAT is a good move – it gives you that grounding in the fundamentals of accountancy. There’s not much point going into this if you don’t have a grasp of the nuts and bolts of accountancy. What makes a great accountant? Anna: What, to you, is the difference between a good and a great accountant? Chris: Technical knowledge is important, but I don’t think it’s everything. What’s key is the ability to speak to a client in a way they understand. You could throw a stone at the 38,000 accountancy practices in the UK and you’d hit someone who’s technically competent. But you’d be incredibly fortunate to hit someone whose clients are universally satisfied with the service they’re getting. That won’t be because the accountant doesn’t know what they’re doing. It’ll be because the client is just getting something to sign every month. If you’re a great accountant, you explain what you’re doing, advise the client, talk through the options and make recommendations. Anna: Does that come through experience? Chris: It’s understanding the problems yourself and being able to communicate in an engaging way with the person who needs the information you have. If you can do that, you’ve got it cracked, because you will immediately set yourself apart from most other accountants. It’s a generalisation, but we hear it a lot from clients: if you’re paying for something that you don’t understand, it doesn’t feel valuable. However, if someone says to you “I’ve done your accounts. Why did you spend so much money on marketing? Revenue didn’t go up at all. What happened?”, then that will feel valuable. Anna: It sounds like accountancy and consulting are coming together. Chris: Absolutely. For me, they’re one and the same. It’s the model of accounting going back a hundred years, when your accountant was your business adviser. Then we had this phase where accountants signed things but took no risk. Now people want advice again – all within regulations, of course. This article first appeared in our Summer 2018 issue of 20 magazine.