How analytics will transform the finance team Posted 06/12/2018 by Mark Rowland & filed under Annual Conference, Members. Business intelligence and analytics tools can turn your spreadsheets into visual stories that anyone in your company can comprehend. Sam Ellis FCCA is head of operations and finance at InterWorks Europe, a business intelligence consultancy firm. He says that analytics will be a game changer. “It allows you to do all your core role, but also ask any question you want of the data. We’re used to producing P&Ls and balance sheets. Those are standard reports, known information, known structure. But you also might want to explore a bit. Why is this thing happening? I’ve got a gut feel about this thing. Then you can use the data to answer the question and prove your gut feel. That’s the fun part.” Your work becomes accessible It will make the work of finance teams more accessible – and therefore more valued – for other teams in the business as well. By using interesting visuals, Ellis says, finance becomes much easier to understand. “So much of our daily lives is now oriented around visual. Our phones are visual, and that’s what stimulates us. And that’s where we understand things quickly. So, the more we can adopt that and leverage that, the quicker people will be at getting the message that we’re trying to get across.” It helps you to speak ‘sales’ Although you can create more visual documents in Excel, it takes a while to build. With modern analytics tools, it can take about half an hour to create an engaging visual report, Ellis says. For a practiced hand, it can take a few minutes to create a unique visual report. “It gives you a common ground to go and speak to someone in sales: ‘Hey, I was just looking at this data. What do you think about it? Is this something you would use?’ You start to collaborate with people and integrate. I think that’s important that we’re not in this silo, that we do break out of that.” You’ll ditch the pivot tables The profession will move away from tables and numbers, he says, because they take too long to create and to explain. “You can spend 10 minutes explaining something, only to see that people did not understand it. “Whereas if you show someone visually they tend to say: ‘I get it. I see what you’re saying.’ I think we’re not great at [visual presentation] now, but I think we’re going to get good at it.”
The ultimate crash course in Excel – part 1 Posted 06/12/2018 by Paolo Lenotti & filed under Excel tips. Please enable cookies in your browser to watch the videos. Note: we are currently experiencing difficulties with the videos in this article, but are working to resolve it ASAP. Thanks for your patience. Excel tips: Ultimate crash course series Part 1 – Copy, cut & paste in ExcelPart 2 – Conditional formatting in ExcelPart 3 – Pivot Tables in ExcelPart 4 – Mathematical Formulas in ExcelPart 5 – Excel formatting guide for a great looking spreadsheetPart 6 – Essential Excel formulas like vlookupPart 7 – Filtering your data in Excel In part one of this series you’ll learn the essential formulas and functions you need to get from zero to hero in Microsoft Excel. This series has been designed using data from the thousands of learners on Filtered courses and 30+ Excel experts. The basics Excel has some clever features when it comes to inputting text, such as automatic date and time formatting. This is useful and at times, when it’s unwanted, a little annoying. Luckily there are ways to ensure that you control what the cells show. In the next video, we will take a look at how Excel deals with numbers entered into a cell. Text can be entered into cells in Excel although we would never recommend using it as a word processor, like Microsoft Word. When a cell is selected, start typing to enter text into the cell. For general text – words & letters, or a mix of words and numbers, what you type is what you will see. There are also some important points to note when entering dates into a cell: OK, so now you know how to enter text, we’ll put together our first spreadsheet: In this video, we will look at how to enter data into a spreadsheet and how to manipulate column width. Copy, cut, paste, paste, special Now the basics are out of the way, let’s start using some simple functionality: copy, paste and paste special. Copy You will often find yourself needing to copy data when using Excel. Much of editing in Excel is similar to editing in other Microsoft Office applications. So if you know how to copy and paste text into Word, you know how to do so in Excel. This article will give you a set of simple tips and tricks to copy/paste more effectively into Excel. ‘Copying’ in Microsoft Excel duplicates the contents of all the cells that are selected. These are then held temporarily on the ‘clipboard’, ready to be ‘pasted’ somewhere else. Usually, the content of the clipboard isn’t displayed but held invisibly in the computer’s memory ready for pasting. Being able to copy is very important when dealing with large amounts of data as you’ll often need the same information in multiple locations. Cells that are selected ready for copying appear grey with a bold, dark border. As with other Microsoft Office applications, there are many ways of performing ‘copy’. To keep things simple, we recommend the two most common – one using the keyboard, and another using the mouse: Ctrl+C (Hold the Ctrl key down and press C) Right click on the selected cells to bring up the menu and select Copy A quick video to show you how: Cut If you want to move the content to a different cell on your spreadsheet, then you need to use Cut instead of Copy. Here’s how you do that: Paste Once you have copied or cut data from a cell, you’ll want to paste it somewhere. ‘Pasting’ transfers the contents of a cell or cells (that were previously copied and held in the clipboard) to the selected cell. Where more than one cell was copied, the cell selected for the paste will be where the top left hand corner of the selection is – the rest of the selection will have the same relative placement as in the original data. As with copying, to keep things simple, we recommend using just one or two of the many ways of pasting – one using the keyboard, and another using the mouse: Ctrl+V Right click on the selected cells to bring up the menu and selecting Paste You can paste copied cells again and again, at different points in your spreadsheet, without re-copying them. Pressing the Escape key (Esc) however will cause the copied contents to be forgotten. What’s being pasted Ctrl+V, or simply ‘Paste’ from a menu, reproduces the contents and formatting of the copied cell. If whole rows or columns were selected, their height/width would be copied too. If the cell has a comment attached, that comment will also be copied. The content of the cell is whatever appears in the Formula bar when the cell is selected. This content can be a formula (in which case it is preceded by an = sign) or data. The result of the cell is what numbers or text appear in the cell in the worksheet. The result can change when a cell is copy/pasted elsewhere, if the content is a formula. Data cells will always stay fixed when copied – their content and result are identical. The formatting of the cell includes: The appearance of the cell (fill colour, border, font type and size, orientation of text within it, etc.) and The ‘type’ of cell – whether the cell contains numbers, text, or a date (more in our Cell Formatting and Number Formatting units) Partial pasting and paste special Sometimes it’s useful to paste only some attributes of a copied cell. Excel offers a few options. Three favourites are: Paste Values – By default Excel copies over a formula, but sometimes you just want the result. Paste Values does that for you. The shortcut for Paste Values is Ctrl-Alt-V-V (then hit enter). Paste Values and Number Formats – is the same as Paste Values but it brings over the format of the original cell. This is particularly useful when copying over dates or a currency but you don’t want to copy the formula from the original cell. The shortcut for Paste Values and Number Formats is Ctrl-Alt-V-U (then hit enter). Transpose allows you to flip rows and columns around in seconds. Turn a row of numbers vertical or vice-versa by simply copying and then using Paste Special – Transpose. The shortcut for Transpose is Ctrl-Alt-V-E (then hit enter). Pasting values: Transposing: If you haven’t done so yet, open up Excel and start practicing your copying, cutting and pasting. Knew all that already? In the next post, part 2 of the series, we get straight into the good stuff with Conditional Formatting. See you then! These tips were provided by filtered. AAT students and professional members can access a wide range of Excel resources and training.
Why the accountancy profession needs to adapt or die Posted 06/11/2018 by Mark Rowland & filed under Annual Conference, Members. Sumit Agarwal, founder and managing partner of DNS Accountants, believes that accountants are facing an extinction level event. Speaking at the AAT Annual Conference, he explained that the threat is survivable, but only if the profession embraces change. ‘This is no longer a choice; it’s a mandatory requirement. If there’s a contagious disease and there’s a vaccination available – you get vaccinated,’ he says. ‘It’s survival of the fittest. If they don’t adapt, they die. ‘Look at what is happening in retail today. House of Fraser just announced they’re closing 31 stores. Most retailers in the UK have not taken the threat from Amazon seriously. The same thing will happen in the accounting profession. Do you want to be part of the adaptation, or part of the extinction?’ Legislative challenge The amount of legislative and technological changes over the past five years have been incredibly extensive, Agarwal says. As a result, accountants have been focusing on catching up with obligations around compliance. But this is distracting from the real challenge – adding value when traditional services are losing theirs. ‘A lot of small businesses are struggling, and if their accountant can’t come to their rescue, they will change accountants. We have to redefine the profession in the next five years.’ Accountants need to run their practice more like a business, he says. They must be more sophisticated in the way they market themselves and how they work with their clients. ‘Compliance is becoming more product oriented, and as a result, accountants won’t be able to make a good living from it. The profession can die if we don’t become advisors, if we don’t work closely with our clients. ‘I personally feel it’s redefining the entire profession, particularly the practice side. This is a massive opportunity for the accountants who are geared towards it, but it could be sad news for accountants who aren’t prepared for the change.’ Changing mindsets The biggest challenge for many accountants is changing their mindset, says Agarwal, who created his own software, Nomisma, to help with his practice’s own transition in 2013. Buying into technology is the easy part; letting go of old habits is the challenge. It doesn’t have to be a scary process, however. ‘It’s not rocket science; if you know how to use the internet and mobile, it’s not a great leap from that. You take a step-by-step approach; it’s a journey. You need to think about digital marketing, you need to be working on cloud and you need to be working on mobile. It’s bringing the accountant-client relationship closer together, so that they work in real time, rather than once a year.’
3 ways to make your strategy succeed Posted 06/08/2018 by David Nunn & filed under Annual Conference, Members. Chris Paton shared insights about how to develop a successful strategy, gathered from a distinguished career in the marines and as a professional advisor to business. We caught up with him at the Annual Conference… Insight 1 – communication is the point Developing a strategy takes time and reflection. But it’s only half the battle. Communicating it successfully is where most businesses fall down says Paton. ‘What does a good strategy look like? Maybe it has vision and mission, though we are not always sure of the difference between the two. Then we add objectives, timelines, constraints and risks. What happens when you try and put all that in a document? It’s too much for other people to take in,’ says Paton. To illustrate his point, he throws a handful of sweets to a delegate and asks, how many were you able to catch? Insight 2 – boil down the message Paton suggests boiling down the strategy into an intent statement of no more than 100 words. ‘You give people just enough information to get them headed in the right direction. Instead of giving all the reasoning, you include a pinch of objectives, a dash of vision, a twist of constraints and a hint of how, etc. ‘The intent statement becomes a guide so people know which way to head when they have a decision to make. It’s something they can recall and actually use.’ Insight 3 – freedom in a framework When it comes to putting ideas into action, Paton offers his thoughts. ‘People say that leadership is about getting people to own the plan. In the military, we went a step further. We got them to write the plan themselves.’ That requires trust. Trust can be daunting, and can sometimes backfire. So a good way forward is to make it safe by giving “freedom within a framework”. ‘Define the direction you want to go, such as I want more corporate clients. Then set the constraints in terms of risk or costs. Then ask them to come back with their plan.’ Paton learned in the military that you don’t have time to get to know people and decide if you are going to trust them. ‘I have to give you 100% of my trust up front, it’s then yours to lose. ‘The funny thing is that I have seen again and again over the years, the more I have trusted people and given the permission to fail, the less they actually do.’
Top 5 GDPR myths revealed Posted 06/08/2018 by Mark Rowland & filed under Annual Conference, GDPR, Members. Even now there are strange misconceptions around about General Data Protection Regulation (GDPR), according to Ian Cooley. Ian was a speaker at the AAT annual conference, and is is Data Protection and Privacy Specialist at GDPR Advisors UK. Here’s what he tell us: Myth 1: Brexit will put an end to GDPR In short – no it won’t. GDPR is already written into British law, and the government has no plan to reverse that. Myth 2: You’re either a data controller or a data processor Actually, you can be both – particularly if you’re dealing with client’s personal data and their employees’ personal data, or that of their suppliers. You would be the controller of the client’s data, and the processor of the payroll data – you’ll need a written agreement from the client to share that information with a third party. ‘It’s not uncommon for people to be both, but I don’t make too big a deal of it, because people struggle to get their head around whether they’re a controller or a processor,’ says Ian Cooley ‘To put it simply, a controller decides what’s collected and what happens to it, and are the organisation or person you believe you have the relationship with. And it would be your reputation on the line if your processors mess up with the data you’re controlling.’ Myth 3: Business data is included under GDPR GDPR only covers personal data – invoices, purchase orders and similar documents are not covered, as long as these only include information about the business. There are some grey areas however: what if the business address is also a personal address? What if the name of an individual is in the name of the business. ‘With partnerships, it can be tricky to spot whether there is any limited liability. If there is no limited liability associated with them, then they are individuals… It does put a bit of onus on the person using the information to do a bit of research into who they are interacting with. That’s moving things on quite a long way from where it is at the moment.’ Myth 4: Sole traders don’t have to worry about GDPR Sole traders who handle personal data do indeed have to worry about GDPR – there is no size limit to the new regulations. ‘I’ve heard people say “we’ve got less than 250 employees, so it doesn’t apply to us”. We saw a misconception peddled by a lawyer that there’s a small business exemption under the Data Protection Act that will continue under GDPR – there’s never been a small business exemption.’ Some confusion has arisen because not all businesses need to register with the ICO, but all have to be compliant with the regulations. ‘There’s an online checklist that you can do on the Information Commissioner’s website to determine whether you need to register with the ICO. Some of those points need an A4 sheet to explain what’s covered under one term. So there needs to be a bit of fine tuning around it. But in reality, unless it’s a personal Christmas card list, you need to comply with it, even if you don’t register.’ Myth 5: Compliance is a matter of checking a few boxes Actually GDPR is much more complicated than that. There are a lot of elements that won’t be clear until tested in court. ‘It’s not possible to be 100% compliant because you don’t know the rules are yet,’ says Cooley. ‘But you can’t tick a few boxes and become compliant in a week. ‘It’s not about the certificate on the wall – it’s how you do business. It’s about treating your clients’ personal data with the care and respect it deserves. That’s the key to it.’
4 things HMRC says you must do for Making Tax Digital Posted 06/07/2018 by David Nunn & filed under Annual Conference, Members. The architect of HMRC’s Making Tax Digital (MTD) initiative is under no illusions that the transformation is a challenge. But Oliver Fisher also told delegates at the Annual Conference that MTD will happen on time, starting next April. And it will be beneficial. Two sides to the MTD coin Fisher, Deputy Director – Making Tax Digital (Business) Strategic Design & Policy, says there are two ‘sides’ to the coin with MTD. ‘One side is the ability to reduce the amount of tax lost each year. The other is that we are trying to nudge and cajole businesses into doing things digitally. It is about the benefit your clients could achieve from being more digital.’ Fisher shared a story of a south coast accountant to illustrate his meaning. A small practice where 50% of clients could be transitioned to digital, and 50% that would be more challenging. ‘One client they had to work with was a hairdresser who wrote up the books over a glass of wine every Friday night. ‘Over six to twelve months they got her to try a software package. She not only got her Friday evenings back, she was able to understand in much more detail her relationship with her suppliers. She could also understand [that] one of her stylist was underperforming.’ Digital services ‘give you the opportunity to encourage your clients to improve their businesses.’ MTDfb will happen on time Fisher is ‘absolutely confident of hitting the April 2019 deadline’ for VAT. ‘The deadline for VAT has always been with us for three years. We are building iteratively, testing and adapting. So we know the systems work.’ He adds that despite the decision to delay services last year, they were still ready. ‘We were ready for April 18. That should give others confidence we can deliver to the dates set.’ Software systems – work in progress Agents still await for a list of compliant software available to use. However Fisher says it is getting close. ‘We have over 100 companies actively engaged in developing products. 40 of those are close to being market ready. A cohort of those we are testing already. ‘We are getting VAT returns using compliant software. We are looking now to grow that, both in number of products and the complexity of the businesses.’ Help and publicity campaigns planned HMRC intends to run an advertising campaign to raise awareness among clients of the move to digital. This was seen as crucial by some conference delegates, who anticipated agents would have to charge extra fees for supporting clients through transition – a burden they felt they were being left to explain to customers themselves. However, some help was forthcoming. Fisher revealed that the HMRC has ‘a soft landing period in mind’ during the first 12 months. ‘We understand that it may take a penalty notice landing to focus some businesses’ minds,’ said Fisher. Jump on board early From the end of this year, HMRC will have large numbers of extra staff on hand to support transition. ‘My advice to you is strike early. Get involved now and get the most support. Over time, help will be stretched more thinly.’ Fisher also advised agents to apply early on behalf of clients who would need exemptions from digital VAT returns. Around 1% of the base is currently exempt, and will retain access to the current VAT return portal. Others who will need new exemptions – perhaps due to their age or because of connectivity problems – will be handled on a ‘case by case basis’, so the advice is to apply early. Public notice on VAT coming soon A public notice on VAT is schedule for this summer, which Fisher tips as a must-read document. ‘It will detail the iterative journey’ for the VAT scheme. ‘I would encourage agents to set up an agent services account, even just to dip a toe in the water. If your clients are above the VAT threshold this is absolutely necessary. With income tax on the way at some point too, the sooner you can encourage your clients to use software, particularly software compatible with your own systems the better.’ HMRC seeks your feedback to raise standards HMRC wants feeback from AAT members about poor practice by unregulated agents. AAT members can share experiences by clicking the button below: Give your feedback
HMRC seeks evidence of poor practice by unregulated agents Posted 06/07/2018 by David Nunn & filed under Annual Conference, Members. The head of customer compliance at HMRC appealed to AAT members to share their insights into professional practice in an effort to raise standards. Speaking at the AAT Annual Conference, Penny Ciniewicz asked AAT members to share opinions and evidence of standards in unlicensed parts of the profession. ‘We don’t want to see tax avoidance, the public doesn’t want to see tax avoidance. So it’s important that the right standards are in place across the profession. We are therefore interested in feedback from AAT members,’ she told AAT Comment. ‘[Do] you see poor practice in other parts of the market? How does this impact on you? On consumers? And on compliance? ‘ Give HMRC your feedback The appeal to share feedback was just one way Ciniewicz wanted to work in partnership with AAT – ‘It’s really important we address our shared challenges together’, Ciniewicz said. Help fix IR35 HMRC is also asking for assistance to improve IR35. ‘There is evidence that this legislation is not working effectively, and non-compliance is widespread. ‘The consultation is open and will run until 10 August. I would really welcome it if you would take the time to read it and respond with your views,’ Ciniewicz told delegates. Encourage take up of digital services Ciniewicz also appealed to AAT members to help HMRC by encouraging take up of digital services. ‘We encourage agents to engage with the digital services we provide. If they register, it’s a really important opportunity to see how the service develops. We are seeking input from organisations like AAT for the design and development of our digital services. Around 6,000 agents have signed up for the service so far, while 15 million individuals have taken up Personal Tax Accounts, and 3 million businesses are using Business Tax Accounts. HMRC seeks your feedback to raise standards HMRC wants feeback from AAT members about poor practice by unregulated agents. AAT members can share experiences by clicking the button below: Give HMRC your feedback
Study tips: VAT Posted 06/06/2018 by Gill Myers & filed under Advanced Diploma, Students. It was the end of the VAT quarter for a client of mine recently, so I have been updating the accounting records in preparation for submitting the VAT return. As I left the director asked me, as he does every quarter, when the return needs to be submitted and the payment made. Driving home I found myself thinking about the need all VAT register businesses have to produce accurate returns and submit them in a timely manner. In reality, preparation for VAT returns happens daily as accurate bookkeeping will result in accurate returns. Accounting software produces a VAT return with a few clicks of a mouse but the content of the boxes will only be correct if calculations and the accounting treatment of transactions were right when they were performed and processed. My client has a fantastic administrator who does most of the routine bookkeeping but does not have an accounting background and understandably makes the occasional mistake. These are usually minor and easy to correct but have the potential to result in an inaccurate VAT return. Gross and Net Recognising the difference between VAT-inclusive (Gross) and VAT-exclusive (Net) figures is crucial. This is because the VAT is calculated differently for each and you will end up with significantly different figures if you mix them up. For example, the VAT in relation to a sale of £6,000 could be £1,000 if it is a gross figure but it would be £1,200 if it is a net figure. We’ve looked at how to calculate VAT in a previous article but it is worth mentioning here as often it is just a case of taking the time to read the invoice properly to see which figure is being used; most invoices will show both. Therefore, any issues could be related to the option you select in your accounting software. My client’s software is set up to process supplier invoices as VAT-inclusive so that the total figure is entered and the VAT figure is then automatically extracted. However, the sales invoices are generated by entering VAT-exclusive figures and the software adds the VAT on to arrive at the correct invoice total. Both ways are fine. The point is that you simply need to ensure that the setting you select matches the VAT status of the figure you are processing. Bank payment and receipts When it comes to payments and receipts though these will, by default, be gross figures. This is because the amounts that are paid to suppliers will be the total amount due, which have to include the VAT, unless you want lots of phone calls from unhappy suppliers! Equally, I would be making lots of calls to customers, if the monies received in full settlement of sales invoices only covered the net amount and didn’t include the VAT. Returns and credit notes Whilst I was reconciling the bank payments and receipts, I came across a payment to a supplier that didn’t match the amount showing as outstanding in the accounting records. I went back through the records and discovered that a credit note had been processed as an invoice. As the only difference on the supplier’s paperwork between an invoice and credit note is the wording, it is easily done, however, the implications for the VAT return are significant. Input tax is recovered in box 4 and is the VAT that has been paid on purchases less any VAT refunded, so to speak, on credit notes. In this case, the original invoice was for £1,500 plus VAT and the credit note was for £500 plus VAT. So the correct figures should be: Box 4 = £200 (£300 from the invoice less £100 from the credit note) By processing the credit note as an invoice not only would the VAT have been reclaimed in error, the error would in fact have been doubled as a credit note should reduce input tax: Box 4 = £400 (£300 from the invoice plus £100 from the credit note as it was treated as an invoice) This example effected the purchase ledger, however, the same issue is found with sales returns and would affect the box 1 figure. Rounding My client’s business is predominately in the service sector but it also has a small retail outlet as well. This complicates matters when it comes to rounding calculations for VAT purposes. The business must be compliant with VAT Notice 700*, which states: 17.5 Calculation of VAT on invoice – rounding of amounts You may round the total VAT payable on all goods and services shown on a VAT invoice to a whole penny. You can ignore any faction of a penny. This section applies to the service invoices it generates and is the general rule most of us understand in terms of being able to round VAT down. However, section 17.5 also says that this concession isn’t appropriate to retailers. So, any invoices generated by the retail outlet must adhere to: 17.6 Calculation of VAT at retailers If you calculate VAT at line level or invoice level, you must not round the VAT figure down. But, you may round (up and down) each VAT calculation. In effect, this means that the VAT needs to be rounded numerically. Submission dates Generally speaking, VAT liabilities can be monitored throughout the quarter and business owners can be kept informed of the likely position at the end of the period, so there are no unpleasant surprises. Again, this is reliant on timely and accurate bookkeeping but cloud-based software has improved the ability of bookkeepers to provide useful information in real time. What hasn’t changed is HMRC’s deadlines for submission and payment. Information about them can be found on the VAT return or on HMRC’s website but in general they are: Normal due date and electronic payment: One calendar month after the end of the VAT period, unless using the annual accounting scheme. Online filing and electronic payment: One calendar month plus seven calendar days after the end of the VAT period, unless using the annual accounting scheme. Note, that the payment must have cleared in HMRC’s bank account by the end of the extra seven day period. Payment by direct debit: HMRC will collect the amount due three bank working days after the extra seven calendar days following the normal due date. Note, that if there are insufficient funds in the business’s bank account to cover the direct debit, a surcharge for late payment may be applied. Mindful bookkeeping goes a long way to ensuring that accounting records are accurate. All the issues discussed in this article are straightforward and integral to daily accounts preparation, however, they shouldn’t be underestimated as they are the foundation of significant reports and returns that are used to manage businesses and fulfil legal requirements such as VAT returns. * https://www.gov.uk/guidance/vat-guide-notice-700#section17 Browse the full range of AAT study support resources here
Making Tax Digital for income tax pilot extended Posted 06/05/2018 by Brian Palmer & filed under Making Tax Digital, News. HMRC has announced the expansion of its Making Tax Digital (MTD) income tax pilot in order to accept quarterly updates from residential landlords with simple tax affairs. While this is another step in the right direction, the list of software developers with Income Tax MTD-compliant software remains low (four at the time of publication). The low availability of MTD-compatible Income Tax products is due to Mel Stride’s Ministerial Statement from July 2017, when he reversed the initial HMRC policy by mandating VAT-MTD ahead of income tax. Since the announcement, most software companies have refocused resources to ensure their delivery of MTD-compliant VAT products well before next April’s deadline, as their top priority. The MTD Income Tax pilot is open to the self-employed and residential landlords (or their agents) with simple tax affairs, who wish to opt out of the current self-assessment regime. To join the pilot they must be willing to keep digital records of their business transactions and commit to sending Income Tax updates to HMRC. This must be done on a minimum of a quarterly basis using MTD-compliant software, instead of filing a self-assessment return. At this stage, those with income from furnished holiday lets are not included.
The importance of recruiting a diverse and inclusive workforce Posted 06/05/2018 by Neil Johnson & filed under Run your business. We previously explored how people often struggle to be heard in the workplace, hit upon the notion that stifling conditions aren’t just a problem for employees, but impact business too, all the way to the bottom line. A workforce that includes people who don’t feel comfortable making their voice heard, for whatever reason, be it personality specific or related to company culture, is a workforce not operating at full capacity, leaving value untapped, innovations missed and even an underachieving bottom line. Extroverts vs introverts Caroline Holt, founder of Attitude Coach, talks about how the extrovert nature of business muffles quieter, more introvert voices, to the detriment of business. “In rooms with lots of people talking, often it’s the quiet one who has the best idea, if they’re given the space. If the majority white middle-aged male business leaders realised how much value is contained within every single employee in their company, they would do more to illicit that value. They would see it add to their bottom line, it would make their business better and more effective.” The need for more variety As Holt more than hints at in that statement, ethnicity and gender are key to the proliferation and amplification of voices in the workplace. Indeed, a McKinsey report using 2017 data shows that companies in the top 25% for gender diversity on their executive teams were 21% more likely to experience above-average profitability than companies in the fourth quartile. Meanwhile, executive teams with greater ethnic and cultural diversity were 33% more likely of outperform on earnings before interest and taxes. “Businesses are becoming more and more aware that an inclusive workforce isn’t just a legal or moral imperative; it directly improves the bottom line,” says Sonya Veerasamy, Client Manager at diversity and inclusion consultancy EW Group. “There’s a large and growing body of evidence around the business benefits: when you get it right, your teams perform better, are more innovative, make better decisions, and stay with you for longer. As one example, research this year by BCG has shown that companies with above-average diversity at management level can boost revenue from innovation by 19%.” The danger is your managers end up hiring staff who are just like them, and so you miss out on the benefits Recruiting D&I Encouraging and developing a diverse and inclusive workforce is a delicate matter. Firstly, D&I are not one and the same and improving one will not automatically solve issues in the other. Additionally, some feel the very notion of a business case for diversity is an affront to people – arguing a business case for employing genders, ethnicities, people with disabilities, LGBTQ sounds like a business saying: “Convince why we should employ such candidates?”. “Recruiting a diverse workforce doesn’t happen overnight,” says Veerasamy. “It requires careful planning around the fundamentals of your recruitment and selection processes, and consideration of the audiences that you’re recruiting from. It all starts with the job description. Make sure it’s jargon-free and can be easily understood by someone outside your organisation, so you’re not excluding anyone at the very first stage. Be imaginative about how you spread the word outside your traditional networks. Make the application process as user-friendly as possible, and don’t forget to communicate your commitment to workplace diversity. This really matters to applicants. In PwC’s 2017 Inclusive Recruitment Survey, for instance, 54% of women (and 45% of men) said they had researched a company’s diversity and inclusion policy as part of their decision to apply for a role.” Unconscious bias Another key point to be aware of as an employer are unconscious biases, which we all have and which historically have lead to the “old, white and male” and “old boys club” image that business is trying to shake off. “Unconscious biases are the shortcuts hardwired into our brains that allow us to make quick judgements with minimal effort,” says Veerasamy. “But sometimes these judgements can narrow our thinking and impact our decision-making. Let’s take a job interview as an example. The danger is your managers end up hiring staff who are just like them, and so you miss out on the benefits that spring from embracing difference. It all comes down to how you design your practices and processes in advance, because managing bias isn’t something that can be done in the moment.”