Instead of counting the cost of the current crisis, clients now need their accountants to help them identify and forge a way ahead, writes John Kennedy.Whatever your age or the stage of your career, 2020 is a year like no other. In recent months, your world, your life, and your practice will have changed in a way that no-one thought possible. This has brought great anxiety, stress, and pressure for many. It has disrupted virtually every aspect of life, and it has changed many long-standing priorities and perspectives.At the outset, every conversation was about COVID-19. Then the emphasis began to shift; the focus started to move to how to respond to our unfamiliar new world, to learn how to deal with a dramatic new lifestyle, get better at cooking at home, become more proficient in using technology, and adapt to meeting online.As the days and weeks went on, this shift in emphasis continued. The importance of taking care of our minds as well as our bodies, and supporting each other, came into sharp focus. It is important not to overlook the far-reaching significance of this evolution in thinking. In a world with unforeseen financial pressures, how we connect with others has taken on a revised and revitalised importance and has become established as holding significantly increased value in so many aspects of business life.Reliable, trustworthy customers and clients you can turn to when the pressure is on matter now like never before. The implications will have an impact on your practice, and business in general, for a long time to come.An important lessonOne of the good news stories during the initial stages of the crisis was the way Irish people contributed to fundraising for the Choctaw Nation. As you may know, during the Great Famine in the 1840s, the Choctaw tribe of Native Americans sent much-needed funds to help with famine relief in Ireland.When the coronavirus crisis struck, the Choctaw nation set up a fundraising website. They were at first surprised, and then amazed when donation after donation came in from the Irish community around the world. In an interview about the donations, one of the contributors told this story about an old tribal chief who taught his grandson about the important lessons in life.“There is a fight going on inside me, a far-reaching fight between two wolves. One wolf is evil; he is anger, frustration, sorrow, regret, self-pity, and doubt. The other wolf is good; he is hope, generosity, sensitivity, understanding and confidence. The same fight is going on inside you and every other person too.” The grandson was transfixed. “Which wolf will win?” he asked. The old chief smiled and said: “The wolf you feed.”This is of crucial importance to your work in the months to come. Helping your client feed the good wolf inside themselves should be a central part of your work, as many of your existing clients will feel overwhelmed. They will have come through months of stress and worry, even the optimistic ones who bear it lightly. Many will need to look again at their finances and their financial planning, as many apparent certainties have been overturned. Much has changed, much of it forever.With so much change happening in their lives, it is vital that as their accountant, your relationship with your clients also changes. Clients often have a fixed view of what they should want from their accountant. They believe that they should look to their accountant to prepare accounts, undertake audits, and give tax and compliance advice. In this time of change, your task is to guide them from what they believe they should want to what they genuinely need most.Feed the right wolfMore than ever, clients need you to help them identify what constitutes success in the months and years ahead. Your value will come as much from helping them think clearly as from the technical tasks you carry out.To fully emerge from the coronavirus crisis will take many years. The phrase the ‘new normal’ is much overused, but it holds an important truth. Things may not be normal, but they are certainly going to be new and this is true for every aspect of your clients’ experience – including how they work with their accountant.For almost everyone, the first half of 2020 has been a time of frustration, stress and doubt. If you let your clients see you as the person who will confirm and verify a deeply damaging period for their business, their finances and their lives in a harsh financial record, you are going to be the focus of much of their stress and angst. Left to themselves, it is all too easy for your clients to focus on and feed the bad wolf.For the foreseeable future, every wise accountant will take an active hand in guiding their clients to think about the things they most need. The greatest problem with the COVID-19 crisis, however, has been fear of the unknown. So when it comes to your role, you must replace the fear of the unknown with clarity, understanding, well-thought-out confidence and a path that takes them to a better place. This is the good wolf.Moving from ‘want’ to ‘need’How often have you chatted with your clients about their life, family, hopes and ambitions before ‘getting down to business’? Instead of getting down to the business of counting the cost of the current crisis, however, they now need you to help them see the way ahead. They need you to shape a clear image of a future they can reach. This is not an invitation to become a counsellor or a cheerleader; it is much more important than that.Your role is to help your clients see the commercial realities and show them how to identify each individual stepping stone to get them to the other side of this whole challenging experience. In the short-term, that may well be about survival. You may need to place a sharper focus on identifying new ways to manage cash flow and to help them understand their options in this new reality so they can more effectively chart a course as the emergency financial instruments are removed.While accurate returns and timely compliance will remain part of your role, your real value lies in helping remove your clients’ fear of a future that is worryingly unclear and unfamiliar. Many clients will need to restructure long-standing business practices, to secure new sources of purchase finance, or to change the terms of access to credit.They will need you to help them understand that this will pass, and it will pass most easily and most quickly for those who know how to plan the practical steps to get to that future. The accountants who focus on the need to actively shape the future rather than count the cost of the past or worry about the unknown will stand apart as a source of uncommon, vital value. This will provide a real, tangible return for both you and your clients in the months and years ahead.By helping your clients in this way, you will significantly improve the likelihood of their long-term financial survival. You will open up new dimensions for your relationship with them, binding them to you for years to come. And these new relationships will survive the evolution of traditional accounting as your role as an adviser continues to grow.This is a time to take a firm hand and raise your clients from what they want, to what they need. It is time to help them feed the good wolf.  John Kennedy is a strategic advisor. He has worked with leaders and senior management teams in a range of organisations and sectors.

Dr Michael Hayden provides the accounting practitioner with some food for thought.The COVID-19 pandemic brings a realisation of the importance of certain sectors in our society. While many businesses cease operations, food producers and farm enterprises are acknowledged as essential services.The economic significance of the Irish agricultural industry is well documented. However, in these unprecedented times, the focus has turned to its social importance. This provides an opportunity for the accounting profession to reflect on how it can best assist and support farming businesses, not only in the current circumstances but in the future.A question worth considering is: does the agricultural community reap the full benefit of the extensive knowledge and skills the accountancy profession has to offer? While acknowledging that challenges exist for accountants in delivering their services to farm clients, there are significant opportunities for accountants and farmers to work more effectively together to develop sustainable farm enterprises.Industry contextThe agricultural industry is an integral part of our economy and society. After the economic crisis of 2008, the government primed the agricultural sector to stimulate economic growth and set out ambitious goals for it in the Food Harvest 2020 and subsequent Foodwise 2025 strategy documents. The Department of Agriculture, Food and the Marine’s 2019 Annual Review and Outlook report outlines the importance of the industry. It claims that food produced in Ireland was exported to over 180 markets worldwide and was valued at €13.7 billion in 2018, which represents 10% of merchandise exports. Additionally, the sector contributed 7.5% of gross national income (GNI) and employed 173,000 people (7.7% of total employment) in 2018.Despite the importance of the industry, when average farm size, farm incomes and dependency on farm subsidies are examined, as well as the average age and training levels of Irish farmers, a picture of economic vulnerability emerges. The National Farm Survey (NFS) is published annually by Teagasc and highlights this vulnerability. The 2019 NFS highlights that 34% of Irish farms were deemed viable, 33% sustainable, and 33% vulnerable. It also reports that the average family farm income (FFI) in Ireland was €23,933 in 2019, which varies significantly across farm types (for example, dairy generated €66,570, tillage generated €34,437 and beef generated €9,188). Furthermore, farming in Ireland remains reliant on subsidies which, on average, accounted for 77% of FFI in 2019.Experts warn of another economic crisis post-COVID-19, and there is no doubt that our agricultural industry will attract renewed focus. Furthermore, Brexit represents a significant external risk for Irish agriculture with potentially far-reaching economic, social and cultural consequences. In this context, it is perhaps more important than ever that the accounting profession supports the agricultural community in developing sustainable farm enterprises by assisting farmers in making informed financial decisions based on sound financial management information.Challenges in providing services to farm clientsBefore exploring the opportunities for accountants to provide support to the agricultural community, it is important to acknowledge some challenges that exist in assisting farmers in managing their enterprise.Despite the economic vulnerability of many farms, research shows that most farmers spend little time on financial management. A dislike of conducting financial management activities exists in the farming community. Indeed, they are often viewed as a necessary evil and do not always fit well with the identity of what farmers see as important farm management activities. There are other identity-related issues: many farmers are quite secretive about their financial affairs; some are naturally reluctant to seek farm management advice; many tend to rely on intuition and experience in managing their business as opposed to relying on financial information.As a result of the lack of engagement by farmers with financial management in the day-to-day management of their business, book-keeping systems can be relatively unsophisticated. There is a tendency to monitor bank balances (cash flow), and only a minority maintain management accounting records.The average age of a farmer in Ireland is 59 years. This high age profile is a well-documented concern for the industry. In terms of financial management, older farmers are less likely to invest in their farm and are less likely to strive for innovation and efficiencies.Historically, farmers view accountants as providing a statutory and compliance role, such as filing annual tax returns, with little focus on value-added services. Also, the cost of such value-added services is a barrier as quite often, farmers are unwilling to pay for such services.This profile of the farming community suggests that there are limited opportunities for accountants to provide value-added services to farmers. However, there are ‘green shoots’ that give cause for optimism.Green shoots to exploreIn recent years, there has been a considerable shift in the industry. This shift is transforming the Irish agricultural landscape and providing opportunities for accountants and farmers to work more effectively together to develop sustainable farm enterprises.Policy changes have resulted in some fundamental structural reforms, which have provided opportunities for growth. For example, milk quota abolition under the Common Agricultural Policy (CAP) has resulted in considerable investment and expansion in the dairy sector. While it is acknowledged that farmers tend not to engage extensively and/or dislike financial management, the mindset of many farmers in this respect is changing. In my research, I discovered that where farmers are making strategic farm expansion decisions, there is a considerable degree of engagement with their accountants.Many traditional farm enterprises are diversifying and exploring new markets for their produce. For example, there is an increase in the production of artisan food products directly by farmers, alternative supply chains where farmers sell their produce directly from farm-to-market, and an increased focus on organic food production. These trends and the movement from the traditional farm production system often bring a renewed focus on profit margins, cost management and overall financial management.Farm partnerships and the incorporation of farm enterprises are becoming more widespread in the industry. Such changes in legal structure provide additional opportunities for accountants who have expert knowledge in terms of tax, legal, and succession planning advice.As a result of the above developments, younger farmers are being enticed into the industry. Agricultural courses in colleges and universities have seen strong demand in the past decade, which is very positive. Numerous policy measures have also been enacted to encourage generational renewal, including changes to land leasing arrangements, while tax reliefs/incentives have been developed to facilitate younger farmers entering the industry.These transformations to the Irish agricultural landscape have encouraged farmers to be more open to engaging the value-added services of accountants. This provides opportunities for accountants to develop successful working relationships with farmers, whereby farmers could significantly benefit from the expert knowledge and skills that accountants have to offer.ConclusionThere is vast potential for accountants and farmers to work more effectively together to develop sustainable farm enterprises. Navigating the financial challenges of COVID-19 and Brexit are just two reasons why each farmer should look to his or her trusted accountant for support and expertise as the farming community strives to meet the critical societal demands for a sustainable food supply.Dr Michael Hayden FCA is Assistant Professor of Accounting at Maynooth University.

In 2010, Neil Hughes set out the seven Cs framework to help businesses navigate the great recession. Fast forward a decade, and these principles remain more pertinent than ever.Are you familiar with the old story of the two hikers in the woods? They come across a bear who starts to chase them. One hiker stops and begins changing from hiking boots to running shoes. The other hiker says, “I can’t believe that you think you will outrun the bear just because you change your shoes!” The first hiker replies, “I don’t need to outrun the bear. I just need to outrun you!” The moral of the story? When trading through difficult times, those who are best prepared are most likely to survive.Considering that the current community mentality and enthusiasm is likely to fade when the effects of the recession start to bite and businesses are striving to outperform their peers, this sentiment is even more significant. Many business owners are currently trying to adopt the best strategies to save their businesses. A common characteristic in many business failures is mismanagement. Although not deliberate, many people do not take advice, make the wrong decisions, and incur avoidable losses.With so many external factors at play, how can you best position your business on the road to recovery? What course of action do you need to take to ensure that your firm not only survives, but emerges stronger than before? The seven Cs present a blueprint for business owners and managers who are working hard to beat the competition and overcome significant challenges.1. CounselMaking well-informed and rational decisions under increasing pressure and uncertain conditions borders on the impossible, which is why seeking counsel at an early stage is the first step to pivoting a business during a crisis. How has my business been affected by the fallout from the COVID-19 pandemic? What financial shape is it in? How can I tackle the ‘here and now’ while turning my focus to the future? Avoid falling into the trap of taking unqualified advice; seek guidance from a select group of professionals such as your Chartered Accountant, your solicitor, and your funder. Work with them to formulate a practical and comprehensive recovery plan.2. CommunicationDon’t underestimate the importance of honesty, especially when things are uncertain. Communicate your financial position with the people and groups to whom you are indebted – the taxman, lenders, landlords and suppliers. You will be amazed at the goodwill this generates. Not only are your creditors likely to appreciate your honesty, but it will also take some of the pressure off, which may facilitate better decision-making. Unbridled transparency builds trust, which will help you maintain your integrity. This, in turn, will buy you more time and with time, many things become possible. Start with the truth and go from there.3. CooperationThe current crisis has changed the way we work. With businesses now forced to rely on different forms of communication, relationships between business owners and employees may have changed. Now is not the time for ambiguity. Your staff play a crucial role in helping your business stay afloat during unstable times. Communicate with them clearly and frequently. Be forthright about the condition of your business; they will respect you for it and are likely to show loyalty in return. Failure to secure their cooperation will significantly dilute your business’s chance of survival.4. Clarity of purposeCreate a new business plan that will provide greater clarity on all functions from marketing, finance and accounting to operations, products and services, and distribution. Adopt an entrepreneurial attitude. While there is no doubt that this crisis has presented grave difficulties, it also provides plenty of scope for innovation. Business leaders are stepping out of their comfort zones and thinking outside the box. There are opportunities to be found if you look hard enough. Ask yourself: “how can I ensure my business not only survives, but thrives?” Rediscover the sense of excitement you felt when you first set up your business. This will drive you forward with clarity of purpose.5. CostCost reduction should be a crucial part of your business strategy. Many business leaders will find themselves implementing cost-cutting measures in response to declining revenue, profitability, and reduced access to credit. Instigate a company-wide series of targeted cost cuts. Don’t make arbitrary or general cuts that may adversely impact long-term goals. The main areas for potential savings in any business lie in eliminating waste, seeking out and demanding the best prices for supplies and services, and carrying out certain tasks in-house that were previously contracted out to third parties.6. CashA swift recovery often boils down to one thing: cash flow. Credit controllers work hard to bring in the money and are instrumental in keeping businesses ticking over. Cash control means releasing the ‘lock-up’ of your business (i.e. the latent profit that is locked up in your stock, work-in-progress and debtors). It is a lack of cash that causes many businesses to fail during times of hardship, not a lack of profit. And even profitable businesses will fail if they run out of cash.7. CustomersWith normal operations out of whack, it may be harder for organisations to focus on exceptional customer service. However, now more than ever, customers are exceedingly important. Engage with your customers, ensuring you are adapting to their changing needs. A business owner must strive to continually ensure that the customer’s experience of a product or service is as pleasant, straightforward, and satisfying as possible. During an economic slump, it is your customers who will carry you through.Neil Hughes FCA is Managing Partner at Baker Tilly Ireland and author of Beating the Recession: The Seven Cs of Business Recovery, which is published by Chartered Accountants Ireland.

Michael Clohosey considers the economic impacts of COVID-19 based on a series of interviews with business executives in the Zurich region.Switzerland shares some similarities with Ireland. Both are small countries with very open economies and punch above their weight on the global stage. Both economies also have a high reliance on the services sector, with the pharmaceutical/healthcare industry a large proportion of the industrial sector. Based in the Zurich area for almost ten years, I thought it would be interesting to share some perspective from this part of Europe, focusing on the impact of COVID-19 on businesses in Switzerland. I interviewed finance leaders from various industries, and this process provided some interesting perspectives on the current crisis and offered a view of its medium-term impact.The type of industry in which businesses are active is the main determinant of the impact of COVID-19 in Switzerland. For example, one domestic electrical supply company involved in electrical installations for both commercial and residential property felt only a marginal impact on demand. Another company involved in the production of control devices for heating and ventilation systems, and which has a much larger global presence, is forecasting a slight decrease in demand in the medium-term. On the other hand, an international education company suffered an immediate, almost complete drop in revenue. Once countries started to impose restrictions and prohibit essential travel, this required enormous effort and collaboration from their external partners to ensure that their students abroad were safe and could find a way to get home. While facing a severe decline in revenue and an uncertain future, the firm needed to focus solely on the welfare of its customers stranded in locations like South Africa, China and Australia.Business responseThe logistical response of the Swiss Government, including the travel restrictions, is well-covered in other sources. I will instead focus on the Government’s economic response to the crisis, which was quite strong – even if it was not immediate. One must remember that Switzerland is not part of the EU and does not, therefore, have ready access to the financial safeguards and protection the EU provides. In total, the Swiss Government set aside more than €61 billion to support the economy. This will create a massive deficit in the national budget, but the amount that must be borrowed is significantly lower due to the Government’s large cash reserves. Some economists estimate that the debt to GDP ratio will increase from 26.7% in 2019 to approximately 34% in 2020, easily meeting the eurozone’s Maastricht criteria. The Government’s measures, which focused on different target groups, aimed to safeguard jobs, guarantee wages and support the self-employed. Measures were also taken in the field of culture and sport to prevent bankruptcies and to cushion the financial consequences. Furthermore, there were provisions to delay payment and temporarily waive late payment interest on social security contributions and various taxes.Many businesses availed of this support, especially those in the travel and tourism trade. I know of many companies that eased their liquidity concerns by quickly accessing interest-free government loans of up to CHF 0.5 billion. Companies affected were also entitled to apply for what is termed “short-term working”. This was extremely helpful to the restaurant sector, from which employees were made temporarily redundant. Provided employees were still paid full salaries, employers received 80% of the cost from the Government. Rental payments remained privately managed. Some landlords were open to negotiation, especially where there were obvious financial difficulties on the tenant side. This flexibility to negotiate seemed to vary depending on whether the landlord was a private or commercial institution. Solutions found included deferral of rent payment. In an apparent contradiction, there appeared to be cases where landlords were more open to negotiating when they saw that the tenants were granted access to the Government’s interest-free business loans.There were short- and medium-term impacts on business, including the supply chain. One company that supplies leather to Asia for shoe manufacture suffered a drop in production due to the difficulty in exporting raw materials. Ship cargo returning from Asia was almost non-existent, and any possible exports were therefore changed to air cargo. An educational travel company I spoke to needed to review agreements with all educational partners abroad due to the number of re-bookings where students sought to change school. As we see with the airline sector, re-bookings are preferable to cash refunds. However, this is cumbersome in the educational travel industry due to the number of actors involved. Some firms changed their business models. Third-level institutions, for example, were in the main very quick to react. They established management task forces and brought their curricula online. Online education is one of the fastest-growing global industries, and the pandemic has only increased its expansion.Focus areas also changed in finance departments. The old maxim of “cash is king” was never as important as it is now. Companies that were not so well accustomed to short-term cash planning even hired external consultants to create 13-week cash forecasts. Fixed yearly budgets increasingly became rolling forecasts, with new scenario planning to account for the effects of the pandemic.Seven insights from the COVID-19 crisisA comprehensive review of organisations’ state of preparedness for such an unforeseen circumstance, their reactions to it, and the enforced planning for a new economic reality produced many new lessons. It also underlined the importance of established business principles.Business agility: we saw the importance of agility in how quickly some educational establishments brought their curricula online. Many advanced education establishments are already planning to generate a greater share of revenue through e-delivery.Securing the supply chain: it is very difficult to plan for an almost total transport shut-down. However, we saw in the example above of the shoe production company that alternative methods of transport can be put in place, albeit at a higher cost and risk. This same firm also discovered and used shoe manufacturers closer to the source of the raw material.Strong partnerships: strong business relations, especially with suppliers and customers, are more important than ever in times of crisis. One company I interviewed closed one of its largest partnership deals through online meetings. This was mainly due to the trust already created.Working from home: many firms, especially those in the financial services industry, have identified that productivity has not decreased while employees have worked from home. This has allowed them to offer it as an alternative for the future. In some cases, property leases can be reviewed due to the resultant decreased need for office space. It is therefore expected that the dynamics of cities like Zurich, which until now had large office space occupied by banks and financial institutions, will partially change in the future.Discretionary travel: discretionary costs, especially travel, were already in focus before the lockdown. The fact that many businesses functioned quite well without travel has led to a further appraisal of its value.Cash is king: the funds disclaimer says “past success does not guarantee future performance”. However, past success in the form of cash reserves can guarantee business survival in such times. Even more attention should be paid now to short- and medium-term cash planning.Scenario planning in forecasting: we have seen how macro events can have a drastic impact. Businesses can increase their ability to respond by replacing traditional budgeting with frequently updated forecasting models, which include scenario planning for changes in the economic environment. The conventional practice of involving all departments for budgets or forecasts can be reviewed to facilitate the agility required. Responsibility for financial planning and forecasting cannot be delegated from the finance function.A snapshot of the economic impact of the crisisAs Switzerland and Ireland are (at the time of writing) emerging from travel and business restrictions, I thought it helpful to review some key indicators of the financial impact of the recent upheaval. According to projections from the OECD’s latest economic outlook, similar to the world economy, Switzerland and Ireland are not expected to be at Q4 2019 levels of GDP until Q4 2021. This is projected for each of the two scenarios, which they estimate are equally probable. One scenario anticipates a second wave of infections with renewed lockdowns before the end of 2020. The other scenario anticipates the avoidance of another major outbreak. Refer to Table 1 for the historic percentage changes to real GDP and forecasted changes to real GDP based on economic projections for a single wave of infections.Switzerland and Ireland are expected to suffer similar declines in GDP. This perhaps is logical, given that both economies are driven mainly by the services and pharmaceutical/healthcare sectors. Interestingly tourism, one of the most severely affected industries, is not a very significant part of total GDP; it represents approximately 3% in both countries. Table 1 shows that Switzerland and Ireland have recorded quite different increases in real GDP in the last 20 years. Switzerland’s growth rate has been very stable at an average of 2% per annum, and almost exactly replicates the growth rate of ‘advanced economies’. Ireland’s growth rates, on the other hand, have been higher and much more variable.Putting recent lessons to workIt is not surprising that the global pandemic has impacted the economy in Switzerland as much as it has in Ireland and the rest of the world. People have changed their behaviours, both involuntarily and voluntarily. I have acquaintances who, up until the crisis, never purchased items online. I am sure that countless others in Ireland have just recently started shopping on their electronic devices.The online education industry is booming. Businesses have been quick to change their supply chains and include alternatives. They have also altered their business models, which we see most markedly in the education sector. Perhaps the increased effective use of video communications tools like Zoom and Skype has brought the possibility of education for the masses to greater prominence.The importance of classic principles, like strong partnerships based on trust and communication, has not diminished with decreased face-to-face contact. In fact, the opportunities for many more partnerships have actually increased in line with people’s confidence in, and use of, the internet. Global industry round-tables can be attended from one’s own home and without all the time and travel that was before deemed necessary. Amid the adverse effects of recent months, let us aspire in Switzerland, Ireland and elsewhere to consolidate and develop the positive aspects and put the lessons to work in our businesses.Michael Clohosey FCA is a senior finance executive based in Switzerland.

John Kennedy explains why knowing too much can harm your practice, and where you should apply your focus instead. When I ask Chartered Accountants to make a list of the problems that hold them back from getting new clients, I am sometimes surprised at the issues they include. One point never makes the list, yet it is often a challenge – they just know too much. How can that be a problem? Surely every client wants a highly knowledgeable accountant, someone who is on top of all of the details and knows all of the angles?This is partly true, but it hides how you can inadvertently damage your practice. Unless you take time to step back, think clearly from the perspective of the client and shape your words to meet their needs, you can quickly lose their attention. This problem is compounded by the assumption that your clients pay you for your knowledge of accountancy, but that is not why clients pay you. Why do clients pay you? This is a deceptively simple question. Is it because of the things you know or because of the things you do for them? Or is it because your qualifications mean you are empowered to authorise documents? Each answer constitutes some part of the reason, but each also obscures a vitally important point. There are two crucial distinctions. First, clients do not pay you for the things you do; they pay you for the value you deliver. Second, the value you provide is only partially expressed in monetary terms. The fundamental truth is that, in many cases, clients most value the way you make them feel. Where your real value lies When you were studying as an undergraduate, the emphasis was on increasing your knowledge. You bought textbooks, you attended lectures, you completed assignments and the focus was always on what you knew – more facts, more information, more knowledge. Your exams tested and confirmed your knowledge; the more you could prove all you knew, the higher the grades. And the more you knew, the better you felt and the better you were regarded by the training firms for whom you hoped to work. With this relentless emphasis on knowing more and more, it is unsurprising that you came to assume that knowledge was where your value as an accountant lay. Then you became a trainee Chartered Accountant in a firm. In your application, your interview and all of the tasks you were given, it was assumed that you had the knowledge required. At this point, the emphasis began to shift to the things you did. You were given specific tasks; what you did and the time it took was captured in timesheets. The emphasis of virtually every aspect of your work, your day and your value revolved around recording your activity in your timesheets. And then you set up your own practice. By now, the emphasis had become so engrained – entrenched even – that you assumed that the key to building a successful practice revolved around turning what you knew into what you do, and recording that in timesheets to bill your client. This focus transferred to your client, but the truth is that this is not where your greatest value – nor your greatest opportunity – lies. Your client wants your value, not your time To build a successful practice, you need to move your thinking – and the focus for your client – beyond what you do and towards the value you provide. This involves two steps. The first step is to consciously move the emphasis from the things you do to the value you deliver. This first step is widely accepted but poorly implemented in practice. The second step is perhaps even more critical if much less understood. To build a practice with strong bonds with long-term clients, you need to move the emphasis from facts to feelings. Human beings like to believe that our species is more rational than it really is. We believe that we see or hear something, we analyse it rationally, and we decide. But do you suppress your feelings at work and give dispassionate advice? Are you always logical and provide clients with clearly thought-out analysis? This is what we like to believe, but it is often untrue. The reality looks much more like this: we see or hear something; we filter it through our emotions; we interpret it and tell ourselves a story; and on that basis, we decide if it is right or wrong. This filtering process happens all the time and while every client wants the facts dealt with, they assume that this is the minimum level of service they will receive from their accountant. The bonds that make clients work with you and generate referrals are forged beneath the level of conscious thoughts. Even in business, the way we feel is of enormous importance so you can create a genuine edge by understanding and applying this. The positive feelings generated by your work include peace of mind, increased confidence in decision-making, or the anticipation of a comfortable retirement. These are important sources of value, yet few realise just how vital these submerged feelings are – even in the most dispassionate business transaction. Every interaction has a submerged, and usually unstated, emotional aspect. As a practice owner, you must understand this and use it to your advantage. When making the shift in focus from the things you do to the value you deliver, you must take account of the genuine feelings at play. Value is about more than money Feelings are always there and are an important part of the value provided by a Chartered Accountant – no matter how much we try to convince ourselves that it is “just business”. Everyone has clients they like and clients they do not like; phone calls they look forward to making and phone calls they hate making; tasks they like doing and tasks they hate. We are very skilled at telling ourselves stories that turn these feelings into apparently rational explanations supported by facts to support our conclusions – but there is no avoiding the reality that feelings are very powerful, and this is the same for your client. Let us take an example that shows just how powerful this concept is. Complete this sentence: “More than anything, I want my children to be…” I have used this example for decades and the answer is almost always “happy”. Occasionally, the respondent will say “content” or “fulfilled”, but in each case the answer is an emotion. It is never a financial or factual answer. This is a simple example of just how important feelings are. How to gain an advantage Gaining a client does not begin and end with you making clear all of the things you will do for them. For an individual to act, they must first feel confident that you understand what they want. And more importantly, they must also be convinced and motivated to the point that they are committed to working with you. Being convinced and motivated depends on your ability to address the feelings that so often remain submerged, unexamined, and unaddressed. I have heard about all the effort accountants put into planning and preparing for meetings with potential clients, often spending hours crafting a well-designed and high-quality document and accompanying presentation. But they then go on to tell me that, even as they are discussing the document or giving the presentation, they know it is just not working. Almost everyone has experienced this in some way, but many simply continue as if the submerged feelings are not there or are insignificant. The habitual pattern is to press on with more information, more facts, more details. The result is that you completely overlook the reality that the submerged feelings are the decisive factor in the ultimate success of any relationship. It is much more useful to bring these feelings to the surface. You do this by using questions to draw out how the work you are discussing with your client will make them feel. The truth is that few clients care about exemplary management accounts or pristine submissions. Some do want to use their cash more effectively or to have a clear tax plan in place, but everyone wants to feel the peace of mind or sense of security that these actions bring. Yet, many accountants spend too much time talking about the surface facts, the facts that – even when they are dealt with well – are, at best, efficient and uninspiring. The often-unacknowledged truth is that the feelings you create in your clients are just as valuable in building long-term relationships as the work you do. When you deal with the surface facts well, but the submerged feelings are left unattended, there is the illusion of progress, but the relationship is merely routine with little enthusiasm. New clients in particular will sometimes engage you as part of their initial wave of enthusiasm, irrespective of the work you have done, but that will undoubtedly be a passing phase. The worst-case scenario is where the factual, practical aspects of the relationship are not adequately clarified and addressed, and the submerged feelings are also poorly dealt with. If this is the case, the client may accept you as a necessary evil, and you both bump along for a short time until your client moves to another practice. Even if they stay, these are the clients that are difficult to deal with, slow to pay, and frustrating to have. Only when you take control of, and actively deal with, both the surface level factual tasks and the submerged feelings do relationships take off. When this happens, it is of real value to both you and your client. These are the client relationships you want – you are both in step, you both work well together, and you both feel positive about the work. Too often, however, this kind of relationship is left to chance because the influential role of submerged feelings is seldom acknowledged, discussed, and actively addressed. But you can make these positive and rewarding client relationships a matter of choice. Just get into the habit of raising your clients’ understanding of the importance of the positive feelings generated by working constructively with you as their accountant. Ask about the areas they want to be confident in; probe how putting their affairs in order will reduce stress; and test and draw out the peace of mind they will get. As you become skilled at eliciting and addressing these submerged feelings, you will set yourself apart from your competitors. Move your emphasis from what you do to the value it brings, and then take the critical step of drawing out and addressing the submerged feelings that are most important to your client.   John Kennedy is a strategic advisor. He has worked with leaders and senior management teams in a range of organisations and sectors.

Dr Annette Clancy explains why employees’ mental health should be the organising principle for businesses in the 21st century. 20-30% of us will experience mental health issues during our lifetime. Could the quantity and quality of work have something to do with this?  A recent study conducted in the UK shows that one-third of us are not happy about the amount of time we spend at work. More than 40% of employees are neglecting other aspects of their life because of work, which may increase their vulnerability to mental health problems. As a person’s weekly hours increase, so do their feelings of unhappiness, worry and anxiety. Employees’ mental health is affected by their roles. For example, we might expect to see mental health issues in workers who deal with trauma and violence every day, but studies also show that workplace culture, bullying, disciplinary processes, and toxic workplace relationships all contribute to deteriorating mental health. Many businesses have policies for mental health and workplace wellness, but for those who are trying to cope with challenging workloads and suffering at the same time, policies may not be enough. Very often, people hide what they are feeling for fear they will be stigmatised or punished. Policies need to be backed up with empathetic intervention by managers who have the right combination of ‘hard’ and ‘soft’ skills. Yet, managers are rarely trained to either recognise or manage conversations with team members who may be experiencing mental health difficulties. So, what can managers do to de-stigmatise mental health issues? 1. Create an organisational culture where there is respect for people. This sounds simple, but in practice, it rarely is. Most mental health issues arise from toxic relationships, bullying, harassment or power dynamics. Changing the culture around this would go a long way in helping to eliminate some mental health issues. 2. Train all managers and team leaders in ‘soft’ skills. Help people develop the ability to listen to what is not being said and read body language so that they can pay attention to those they manage. Stress and anxiety are felt, not spoken, so managers must be attuned to how it is expressed. 3. Encourage a culture of openness about time constraints and workload. Employees must feel able to speak up if the demands placed on them are too high. Also, ensure that employees’ jobs are manageable within the time for which they are contracted. Expanding job creep is one starting place for stress in organisations. Monitoring this aspect of an organisation’s behaviour alone could impact significantly on mental health. 4. Allow staff to attend counselling and support services during working hours, as they would for other medical appointments. This proactive initiative sends an important signal that mental health is a priority in your organisation. The World Health Organisation (WHO) defines mental health as “the state of wellbeing in which every individual realises his or her own potential, can cope with the normal stresses of life, can work productively and fruitfully, and is able to make a contribution to her or his community”. The WHO definition provides a policy template for organisations wishing to create a culture in which the mental health of all workers is prioritised, not only those with mental health issues. It offers an interesting insight into how an organisation might be structured if mental wellbeing was the organising principle. As mental health issues continue to increase both within and beyond the workplace, perhaps the WHO definition isn’t so far-fetched. Putting people at the centre of organisations used to be the way we did things; putting the mental health of employees at the centre of organisations may be the way we need to do things in the 21st century. Dr Annette Clancy is Assistant Professor of Management at UCD School of Art, History and Cultural Policy.

Teresa Stapleton explains how senior leaders and managers can create a high-performance culture with loyal, engaged, and motivated employees. An estimated two-thirds of companies still conduct annual performance reviews, despite extensive research and employee feedback which suggests that they are outdated. What most companies hope to get from performance management is engaged, motivated, high-performing employees and business success. But the reality is that annual and bi-annual reviews fall well short in supporting these aspirations. They typically involve time-consuming and detailed write-ups of past performance, which have little impact on future results. More and more companies are questioning the value of analysing past performance based on goals set 12 months ago and rating individual performance on a scale to determine rewards. Most managers and staff dread the whole process. Research by Willis Towers Watson found that only 48% of employees report that performance reviews have helped improve their performance, and just 52% think their performance was accurately evaluated. There is widespread consensus that ongoing performance management and the provision of feedback and coaching is a better approach to creating an engaged, motivated workforce. However, the challenges involved in replacing the annual review process, which has been embedded in organisations for many years, can seem daunting. Over the last ten years, several companies have successfully done just that – transformed their performance management processes to re-energise their organisation and employees. While there’s no one-size-fits-all solution, the following themes are worth considering when re-thinking performance management. Performance management philosophy The starting point for changing any process is deciding what you want to achieve. Defining what specific behaviours, values and results you want to encourage, and whether individual accomplishments or team collaboration – or indeed, a mix of both – will be recognised and rewarded is a good first step. Many companies share their vision, values, culture, performance management philosophy, and employee development approach on their websites as it is where prospective candidates go to get a feel for the company and whether it would be a good fit for them.  The traditional levers for recruiting and motivating employees are attractive pay and benefits, competitive bonus schemes, job security and career development prospects. Also, employee engagement and employee experience are increasingly recognised as being of equal importance to attract talent and drive productivity. Some companies have adjusted their rewards model to empower managers to offer smaller incentives more regularly when goals are achieved. Others offer training, educational support, or development programmes to reward strong performance. Providing a positive working environment where employees feel that their work is meaningful and their contributions are valued is now seen as central to attracting and retaining talent. Senior leaders and managers have a critical role to play in building an environment and culture where their teams enjoy coming to work and are committed to delivering exceptional results. Performance appraisal model Companies often adjust their performance management approach over time to reflect changing economic conditions and the latest thinking on business leadership. The bell curve system of performance appraisal, which was widely used for decades by large companies, has been abandoned by most. This model forces managers to rank employees into a bell-shaped distribution curve, with 20% high performers, 70% middle performers, and 10% low performers. The advantages of the bell curve model are that it helps managers differentiate rewards based on contribution and forces them to tackle low performers. However, the drawbacks of the model are generally believed to outweigh the benefits as it can create unhealthy internal competition to be a top performer and get high rewards and undermine collaboration across teams. It was also viewed as unfair and demotivating to employees pushed into the ‘middle’ or ‘low’ categories to hit the numeric requirements of the curve if this does not reflect their actual performance. Many companies have replaced the bell curve model with less rigid approaches that focus on continuous performance management, providing real-time feedback and coaching to improve performance and support personal development. Some companies have even dropped performance ratings altogether as they focus performance discussions too much on past events, shifting instead to highlight learnings from past experiences and create personal development plans for each employee to increase future impact. Objectives and key results There is a real art in setting meaningful and achievable targets that motivate staff to deliver great results. The biggest challenge is often distilling the broad range of activities each employee is responsible for to highlight the objectives that will contribute most to the overall success of the business. All too often, individual commitments or goals are a long list of activities and deliverables, making it hard for employees to see what is truly important and creates the most impact. Including granular details of job responsibilities or adding broad commitments that apply to all employees, while well-intentioned, often dilute the focus on clear, meaningful, personalised priorities. A growing number of companies like Google, Intel and LinkedIn have adopted the ‘Objectives and Key Results’ (OKR) framework to align company, team and individual goals and set targets. The process involves defining three to five objectives for each individual, with key results that are usually stated as numeric targets or other clear measures to track progress. While setting clear expectations upfront is essential, it is just as important to update them regularly to reflect changing company priorities and business direction. Regular performance check-ins Managers play a crucial role in setting their teams up for success by getting to know the strengths and capabilities of each team member and matching each individual’s skills to meaningful goals. Open communication is essential to set performance expectations, stay aligned on progress, and provide real-time feedback to address issues before things go off course – or to capitalise on opportunities to do things quicker or better. Performance and development discussions should take place on an ongoing basis and not be reserved for a formal review meeting once or twice a year. If regular check-ins are happening, there should be no surprises when it comes to performance assessment and rewards discussions. Most companies have performance management tools to track and monitor performance processes. Automated systems can also help streamline the process of capturing peer-to-peer feedback, highlighting blind spots or behavioural issues that managers should address. Conclusion Modernising performance management requires re-thinking the whole employee/employer value exchange. Employees want to do meaningful work, aligned with their values, where they feel they can grow, flourish and be justly rewarded. Senior leaders and managers have a critical role to play in creating a high-performance culture with loyal, engaged, and motivated employees to sustain business growth and long-term success. Teresa Stapleton is an Executive Coach at Stapleton Coaching.

Although the weeks and months ahead will undoubtedly be challenging, quality should not be compromised argues Fiona Kirwan. Full-year and interim year reporting deadlines are fast approaching for accountants both in industry and practice. Companies’ financial reporting functions and their auditors are getting used to working in ‘new normal’ circumstances. However, these changed circumstances must not compromise the quality of the work we all deliver day-to-day. Here are some issues Chartered Accountants should consider as they seek to maintain the highest level of quality in all aspects of their work. People COVID-19 has transformed the way we live and work. We have heard this phrase a lot in recent weeks, but it remains true. Almost instantly, employees who are used to the rhythm of the workplace became remote workers – many without the chance to prepare adequately. This creates challenges for managers of both finance and audit teams in leading teams remotely. It is more challenging to coach and supervise people who are not physically in the same location. It is therefore important to stay in touch and stay close to your people. Connecting as a community during this time takes imagination. It could mean developing new channels or social tools for employees to share stories; it could mean embracing video calls to create a sense of physical presence. Virtual social events are becoming the norm. Even small investments in building a genuine community can have a significant impact on your employees’ morale. This sense of community helps when coaching teams. People who are closely aligned on a personal level will find it easier to communicate complex information simply and team members will feel more comfortable asking questions and querying essential messages. Teams must be aware that some colleagues may not have optimal ‘work from home’ environments; some are juggling home-schooling with office hours; others are working from their bedrooms in shared living spaces. Organisations should implement flexible working structures to allow teams to deliver quality work while maintaining processes to ensure confidentiality and transparency. Such flexible working structures mean that everyone in the financial reporting process, both finance teams and auditors, must allow extra time to execute tasks remotely. Technology Almost all finance functions and accounting firms transitioned to remote working arrangements overnight, and the quality of an organisation’s technology is critical to day-to-day operations and ensuring business continuity in this scenario. Some organisations may have challenges arising from the fact that their teams are heavily reliant on desktop computers, second screens, or printing facilities that are not available in the home environment. The move to remote working could also leave team members isolated, but this is where the ability to host video conferences, share screens, and collaborate in files in real-time has become vital. Not only do these technical solutions allow teams to communicate internally, they have also become critical channels for communication between auditors and their clients. At PwC, we utilise our combined suite of audit tools – Connect, Aura and Halo – to communicate with our clients and colleagues across the globe. We also use Google’s G-Suite of collaboration tools, and Datashare to help us work with the data of clients with less complex IT systems. The recent uptake in the adoption of these technologies has seamlessly transitioned a lot of this work, which was historically done in person, into the digital realm.  Controls One area where the successful application of technology solutions has become essential is the implementation of internal controls over financial reporting. The appropriate tone from the top is vital; managers need to remind people that remote working might change how controls work, but it does not lower the bar. How companies operate their controls has been amended to allow for remote working. For example, a manual sign-off may now be replaced with a confirmation by email. In these uncertain times, companies will want to ensure that shortcuts are not being taken and rigour – both in procedures and the provision of appropriate evidence to support the implementation of controls – are maintained. Auditors will need to consider whether the controls, as they currently operate, remain fit for purpose and any increased risks that may have arisen from recent changes. Financial reporting The COVID-19 outbreak, and the measures taken to mitigate its impact, are having a significant effect on economic activity. This, in turn, has implications for financial reporting. Companies and auditors must work together to ensure that quality is not compromised – even in challenging circumstances. The following is a sample of the wide range of accounting issues that companies and auditors have considered in recent weeks: Going concern and viability statement: companies must assess going concern at each annual and interim reporting period, with a look-forward period of one year from the financial statement issuance date. Companies impacted by COVID-19 have had to update their forecasts and provide appropriate disclosures to alert investors about the underlying financial impact and management’s plans to address it, including if conditions give rise to uncertainties about the company’s ability to continue to operate; Subsequent events: the consensus is that COVID-19 was a non-adjusting post-balance sheet event for 31 December 2019 reporting. However, the appropriate disclosure of impact on the overall financial statements is a critical element of the financial statements; Measurements of assets: for year-end reporting and interim statements after December 2019, companies and auditors must assess the timing of COVID-19-related events to determine the impact on assets, including goodwill and indefinite life intangible assets, inventories, and deferred tax assets. Companies and their auditors must consider disruptions to the entity’s business or the broader market in determining recoverable amounts of assets. Careful consideration must be given to the net realisable value of inventory and, in the event of a price decline, whether prices will recover before the inventory is sold; Revenue recognition and receivables: identify the appropriate sales price given increases in expected returns, additional price concessions, or changes in volume discounts. Companies and auditors should be mindful that revenue can only be recognised for new sales if payment is probable under IFRS 15; Alternative performance measures: the European Securities and Markets Authority (ESMA) has provided guidance relating to the use of Alternative Performance Measures (APMs) in the context of COVID-19. Consistent with previous guidance relating to the maintenance of consistency of APMs from one reporting period to another, ESMA advises that rather than adjusting existing APMs or including new APMs, issuers should improve their disclosures and include narrative information in their communication documents to explain how COVID-19 impacted and/or is expected to impact on their operations and performance; the level of uncertainty; and the measures adopted – or expected to be adopted – to address the COVID-19 outbreak; and Internal consultations and reviews: audit teams face significant additional internal consultations and reviews in the current environment. Early agreement on timetables and collaborations between companies and auditors will ensure that quality is not compromised. As events continue to unfold, the challenges faced by accountants both in industry and practice are mounting. The weeks and months ahead will undoubtedly be challenging. However, quality should not be compromised. Supporting our colleagues and utilising our technology capabilities will ensure that control frameworks continue to operate, financial reporting will be clear and transparent for all users, and audit quality will not be compromised. Fiona Kirwan is a Director at PwC’s Assurance Practice.

Richard Day and Alannah Comerford look at how Chartered Accountants can explore the potential for robotic process automation using UiPath. In this series of articles, we are exploring the power of visualisation and data analytics and the benefits it can bring to Chartered Accountants. As you may know, the FAE syllabus was recently updated to include data analytics concepts and tools such as Tableau, Alteryx, and UiPath. Previous articles dealt with the concept of data visualisation and the value it can bring to an accountant, and most recently we covered the data processing tool, Alteryx, and the significant advantages it affords when performing data transformations and calculations. In this article, we will move to the more advanced area of automation. Robotic Process Automation (RPA) is an acronym you are probably familiar with, as more and more businesses seek to streamline their operations and exploit the advantages of automation. UiPath, which has been selected by the Institute, and similar tools enable RPA at a practical level. UiPath is a software solution that acts like a robot, programmed to perform the various activities in a process just as a human would. The tool can be used to run without human supervision or can work as an assistant. Automation without human supervision is extremely difficult and may not be the answer for complex processes that require significant judgement, reasoning or analysis from the person performing them. In such cases, automation may still support the person who is completing these tasks as an assistant, but human intervention is vital. However, if we consider those processes that are suitable for automation, they can usually be described as highly repetitive, manual processes where the employee does not exert judgement. All decisions are made based on business rules and pre-defined logic. Significant value can be derived from automation where there is interaction between multiple systems, but the inputs required are standard, making the process tedious and time heavy. Similarly, when the current manual procedure is inadequate for standardising a process and remains subject to error, automation – which has the power to perform the process accurately every time – can be invaluable. As an accountant, you might think that opportunities for automation should fall under the remit of those working in IT. Accountants, with their holistic knowledge of how a business operates and analytical nature, are ideally placed to identify potential automation opportunities and act as a key stakeholder throughout the process. Automation at work Consider a simple process whereby you are required to run reports or extracts from different systems and perform some data transformation and analytics on the information to produce an output, perhaps in the form of a reporting dashboard. Alteryx can be set-up to run workflows to deal with inputs from different systems and produce the desired output. However, you would still need to run the input files and refresh the dashboard manually. Incorporating UiPath can automate the process even further. UiPath can log-in to each system and can be used to run specific reports from different systems at set times, replacing the need to download data manually. It can then load this data into Alteryx, run a pre-defined workflow, and produce the desired dataset. This information can then be brought into Tableau to refresh a dashboard with the current information. In this way, UiPath can be configured as an interface between systems to offer a fully integrated solution. These processes can be as simple as taking a list of suppliers from one system, along with balances from another. UiPath can automate the production of these lists and balances for processing in Alteryx to produce a customer statement. This statement is then converted to a named PDF document and emailed to each customer. In an audit context, where proof of delivery can provide recognition of a sale, client records can be reconciled with those from a third-party delivery company, exceptions identified and presented for further investigation by the auditor. A business can reap many rewards from automation. While efficiency and time-saving with a shorter cycle time immediately spring to mind, increased quality and compliance as a result of a reduction in errors and an increase in accuracy are also often seen. Unlike mere mortals, robots never sleep and processes can operate autonomously 24/7, driving real-time transactions and analysis. While certainly more challenging to measure than the benefits outlined above, increased employee satisfaction through a focus on higher-value activities and a reduction in time spent on menial, repetitive tasks is a clear benefit. It helps shift the priorities of the employee to innovation, strategy and activities that add value to the business proposition, resulting in a happy and productive workforce and consequently, higher output. While the benefits that automation can bring when applied to appropriate processes are clear, we must bear in mind that, while automation can reduce hours in the long run, up-front investment is required to get it right. Also, control-aware accountants would know that any automated process requires ongoing review. A successful move towards automation requires the skills that accountants use all the time. For example, detailed process maps that are validated by walk-throughs are essential as well as thorough testing with scenario analysis. Consideration of the impact on controls, appropriate training, procedures, and user manuals are also required along with a measurement of actual versus expected results and periodic performance assessments. Accountants are likely to be key stakeholders in each of these activities. Admittedly, we have only just skimmed the surface of the potential of UiPath and what it can be used for. Still, given the myriad of considerations included above, this is hopefully understandable. We hope we have sparked a reflection on potential use cases in your own business and perhaps demonstrated areas where Alteryx alone may not go far enough. We encourage you to consider these use cases, investigate whether your organisation has the necessary experience and consider a proof of concept. In the world of RPA, do not be afraid to consult and draw on experience.   Richard Day FCA is Partner, Risk Assurance Leader, at PwC Ireland. Alannah Comerford ACA is Senior Manager, Data Analytics & Assurance, at PwC Ireland.

Raymond Donegan and Ted Webb outline the four steps to a successful sale. As a business owner, selling up is probably the most significant decision you will make in your working life. It is a difficult and often emotional process. However, with the right guidance, it can be navigated over a period of roughly six to eight months to everyone’s satisfaction. Four steps, if followed, will maximise the potential for a successful sale. Step 1: Preparation  The preparation stage sets the tone for the sale. At this point, your corporate finance adviser will draft an information memorandum with your assistance. This should be a compelling document, which will generally contain an executive summary and details of: business history; products or services offered; customers and market; future opportunities; overview of management, staff and facilities; and recent and forecast financial information. In addition to drafting the information memorandum, a comprehensive list of potential buyers should be drawn up by you and your corporate finance adviser. It is better to sell a business that is enjoying a period of growth with some suggestion of future growth remaining for the next owner. Also, if you want or need to retire by a specific date, it is best not to leave the sale too late. Specific areas of preparation to address include financial items such as fixed assets, working capital such as debtors and creditors, operating expenses, and shareholder costs. It is also crucial to assess the status of non-financial items, including management structure, intellectual property, tax status, and the business’ online presence. Step 2: Value the business and make initial contact with potential buyers The key drivers of value from a potential buyer’s perspective are the ability of your business to generate cash and its future risk and growth prospects. Several valuation methodologies can be used, including EBITDA (earnings before interest, tax, depreciation and amortisation) multiples, EBIT (earnings before interest and tax) multiples, and discounted cash flow. Once value has been established, it is time to contact potential buyers. The decision on which parties to approach will depend on the nature of your business and the type of sale process you are planning. Generally, the best result comes from a controlled auction process where several potential buyers are contacted. The benefit of this process is that, by the time the sale goes through, you will definitively know the market value of the business. Your corporate finance adviser will ensure that interested potential buyers receive an information memorandum after signing a confidentiality agreement. Prospective buyers then have approximately four weeks to respond with non-binding indicative offers, and once the offers are received, you and your adviser will decide whom to meet. Step 3: Management presentations and preferred buyer selection There is no substitute for face-to-face meetings; this is arguably the most critical stage of the entire sales process. Afterwards, your corporate finance adviser will request revised offers from interested parties. Now, you and your corporate finance adviser will decide on the preferred party. The price will play a large part in that decision, but other vital factors may include the structure of the deal and bidders’ plans for the future. You will naturally prefer to be paid in full immediately, whereas the buyer will prefer to pay over time. Ways to reach a compromise include: Deferred consideration: when an element of the consideration is paid after an agreed period; and Earnout: when the payment of deferred consideration is conditional on achieving specific financial targets such as an agreed level of sales or profits, or non-financial milestones such as renewing a contract. Once a preferred party is chosen, the heads of terms will be negotiated. This is a short document, which details the key financial and commercial terms of the deal. Step 4: Due diligence and negotiations The final stage of the process involves the preferred party undertaking due diligence on the target business, and all parties negotiating the necessary legal documents to conclude the transaction. Due diligence is akin to an invasive audit, but it is a necessary evil. It usually lasts six to eight weeks and covers several areas including financial and tax, commercial, products/services, legal/intellectual property, human resources and pensions, environmental, technical and property. Remember, the potential buyer’s view of your business can be positively reinforced if you can provide the information promptly. After three to four weeks of due diligence, the buyer’s lawyer will produce the first draft of the legal documents that will give effect to the sale. Assuming you are selling a company, these documents will include a share purchase agreement and a tax deed but may also feature other documents.  Conclusion  Selling a business is a complicated, lengthy exercise that most business owners will only do once in their lifetime. There can be a significant difference between a well-run, competitive sale process and a poorly executed transaction. An experienced team of advisers will know the best techniques to enhance value and mitigate risk for you and your business. Only by engaging with such a team can you expect to maximise your position.   Raymond Donegan is Director and Head of Family Businesses at IBI Corporate Finance. Ted Webb FCA is Managing Director at IBI Corporate Finance.

John Kennedy explains how to turn a casual chat into a steady flow of high-quality clients. A common problem that limits the success of many practices is also one of the most damaging, but happily, it is also one of the easiest to fix. In this article, I will show you how to turn an informal chat into a positive client relationship. When you master this structure, you will be able to manage any conversation so your potential clients will understand how they will benefit from working with you. The self-defeating spiral A typical self-defeating spiral causes significant damage, and it goes something like this: I don’t feel comfortable talking about myself. When I meet potential clients, I often don’t know what to say. I wish I had more clients and more high-quality clients with whom I like to work. I don’t feel successful, so I lack confidence when I talk to potential clients about my practice. For many years, I have focused on identifying what sets high achievers apart. There is overwhelming evidence that the ability to shape and structure a casual conversation is perhaps the single most crucial skill. This skill is not a result of natural talent, charisma or charm – it is a strength that is practised and learned. Successful client conversations It may seem obvious, but a fruitful conversation involves two people taking turns at listening and talking. Yet time and time again, when the pressure of wanting to make a good impression takes over, we make the same mistake. And, odds are, this has happened to you.  It is easy to fall into the trap of believing that your task is to list the many reasons why the other party should become your client. You say more and more about what you think you should tell them until you reach the point – and this can sometimes come frustratingly early – where you run out of things to say or, worse, you keep talking without feeling in control of the conversation as an unwelcome unease inside you begins to grow. Mastering this skill is easier than you think. A fruitful conversation is about listening and talking. You need to understand how to do both effectively and appreciate how each fits together. So, here is the structure of a successful client chat. 1. Prepare The first stage of the conversation takes place when you are on your own. There is no talking or listening, just thinking things through and creating an approach that works. To master the skill of turning casual chats into client contracts, you need to structure your thoughts. You need to understand how best to probe the value your potential client is seeking, the best way to present the value you can offer, and how to propose the next step in what will lead to a long-term, mutually rewarding relationship. 2. Probe The conversation begins here. This stage mostly involves listening and knowing how to guide the other party so that they talk about issues that move the discussion into ‘productive’ territory. Your main task is to keep the conversation casual, interesting to your client, and moving towards an understanding of the value they can achieve by working with you. You do this by asking high-quality questions. As you chat, gently guide the other party through a series of casual questions in a way that helps them clarify their thinking and reach a more valuable understanding of the outcome that is most important to them. The ability to do this effectively is a skill that takes time and practice. However, three fundamental questions form the bedrock of  every successful client conversation: What will success look like? How will you know if we have achieved the success you seek? What is most important to you about achieving that success? You probe your potential client’s thinking by asking these – and related – questions to help them think in a more structured way about their goals. Most clients are unclear as to what they want to achieve, so helping them identify their priorities will encourage them to talk with you more. You don’t do this by telling them how clever you are or by providing all the answers. The real skill and value lie in allowing potential clients to experience your proficiency by helping them structure and organise their thinking. When you master the skill of eliciting the most precise answers possible to these three fundamental questions, you will set yourself apart. By taking this approach, potential clients will experience the value of your expertise, and you will demonstrate that you are focused on helping them define, and then achieve, the success they seek.  These are the firmest possible foundations for a high-value client relationship. 3. Present Only now do you begin to talk more than you listen, and you keep asking questions to maintain focus on the critical issues. In this phase, your task is to help the client see how they will benefit from working with you. You may be inclined to talk about what you will do, but technical considerations are not very motivating for potential clients. Your critical task is to increase their motivation to the point where they decide to work with you. You do this by giving examples, by telling stories of how you helped others facing similar issues, and by focusing on how things will improve. This evidence is already captured in your value menu, where you prepared a store of material that will help your client feel they are in good hands. The stronger they feel about the specific value they will achieve by working with you, the more you will stand out as someone they can trust. 4. Propose In this step, you move the relationship from talk to action. By probing how the other person currently sees things, and how they would like things to be in the future, you are helping them untangle the issues and identify the outcomes about which they feel most strongly. These are the foundations of a strong, trusting relationship. At this point, you may suggest talking further – but before then, you will send a brief note indicating how you can help achieve the success they seek (this is very different to the standard ‘letter of engagement’). The purpose of the note is to confirm that you have fully understood the outcomes your client desires.  A succinct note about the value they will receive will move you from a casual, theoretical chat to a highly practical and highly focused discussion on the specific reasons you should both work together. Like a road journey at night This is likely to be very different to the path you have followed up to now. The traditional, and often ineffective, model tells you that you should outline your expertise at every opportunity; that you should see every conversation as a sales opportunity and sell from the outset. Sometimes this sales “advice” is even more aggressive with outdated jargon that speaks of “closing the deal” or trapping the potential client in the “killing zone”. This is hardly a basis on which to build a high-quality practice with the right clients and high-trust relationships. Instead, the Practice Builder approach outlines the specific steps you should take to help a potential client identify and access the value that is truly important to them. And through a well-structured conversation, you let them experience how you are an essential element in arriving at the outcome they want. It’s like taking a road journey at night. Through your questioning, you help your client identify the destination at which they wish to arrive. You then map out the route and together, you can set off on your conversational journey. You use your questions like headlights, to light up the landmarks and road signs for the next stage of the journey. The critical thing to remember is that you are in the driving seat, choosing the route, and setting the speed – but your client gets to adjust anything that makes the journey comfortable for them, such as opening the window or choosing the music. In this way, the conversation remains a comfortable and stress-free casual chat, but with a clear set of directions, milestones and a destination that you both reach by working together. This approach is fundamentally about helping your client arrive at the success they most value. When you stand out as a master at this, your client will want you on every journey. And they will want to tell all of their friends about you. This is a firm foundation on which to build a successful practice.   John Kennedy is an experienced strategic advisor who has worked with senior management teams in a range of organisations and sectors.

A new report proposes measures for the sustainability of owners’ management companies and lays the foundation for a more structured approach to managing apartment complexes or managed estates. By David Rouse In a professional audit or reporting capacity, Chartered Accountants may encounter owners’ management companies (OMC). Readers living in an apartment complex or managed estate may even have been asked to serve as an OMC director. OMCs, while in form incorporated typically as companies limited by guarantee (CLG), are in substance hybrid entities. They sit at a corporate crossroads between not-for-profit companies, property management businesses and residents’ associations (see Figure 1). Many readers will be familiar with the legacy construction and financial issues facing these companies. High-profile cases such as Priory Hall and Longboat Quay, as well as other less prominent estates, have featured in the press in recent years while corporate governance failings in OMCs receive periodic attention in court reporting. The country’s largest OMCs have multi-million euro annual service charge budgets. And yet, the stewardship of these companies is entrusted to unpaid, untrained directors (the term “volunteer director” is deliberately avoided, as in law, there is no such thing – a director is a director). There is as yet no firm handle on the number of OMCs in the country. However, it is estimated that the upper limit is likely to be about 8,000 companies. New report A recent independent report titled Owners’ Management Companies – Sustainable Apartment Living for Ireland considers issues that will be familiar to those with even a passing knowledge of managed estates and OMCs. The report was jointly commissioned by the Housing Agency and Clúid Housing. The Housing Agency works with the Department of Housing, Planning and Local Government, local authorities, and approved housing bodies (AHB) in the delivery of housing and housing services. Clúid is the State’s largest AHB, managing  just over 7,000 homes across the country. The inadequacy of annual service charges, failure to provide for building maintenance (sinking) funds, and the persistent problem of mounting debtors are just some of the topics assessed. International best practice is examined, and Ontario and New South Wales are among the comparator jurisdictions featured. The future demand for high-density housing is signalled in the context of new Government policy, such as the National Planning Framework and the Climate Action Plan. To audit or not to audit? Recommendations for reform across a range of relevant regulatory systems are proposed. Of interest to the accountancy profession will be the recommendation for the removal of the audit exemption currently available to OMCs, most of which, as noted earlier, are incorporated as CLGs. Companies Act 2014 provides the audit exemption for CLGs. In this way, small not-for-profit companies without shareholders may benefit from a reduced financial and administrative burden. (It should be noted that under sections 334 and 1218 of the Companies Act, any one member of the CLG may in effect demand an audit.) However, while OMCs are not-for-profit, they are responsible for multi-million euro property assets in the form of estate common areas. Considering the centrality of OMCs to property values, good title, and quality of living spaces, the value of an audit to members in terms of assurance, transparency, and governance cannot be overstated. Finance and governance The creditworthiness of OMCs in the context of current under-funding is also considered. Regulation over and above corporate compliance enforced by the ODCE is recommended. Dispute resolution outside of the courts is advocated, as are more cost-effective avenues for service charge debt recovery. Personal insolvency practitioners will be aware that OMC service charge debt is an “excludable debt” under the Personal Insolvency Act 2012. Only with the consent of the creditor (i.e. the OMC) may management fee balances be reduced or written off in a Personal Insolvency Arrangement. The report’s other recommendations include mandatory training for OMC directors, the standardisation of accounts to a format prescribed for OMCs, and enhanced insurance obligations. Reform may be some way off. In the meantime, practitioners should be aware that the Institute’s practice toolkit, Owners’ Management Company PQAs, was updated in 2018. This replaces the 2011 version. As the Institute’s product catalogue notes, and as may be recognised from sectoral weaknesses highlighted in this commentary, although OMCs can be small in size, they may be higher-risk clients. Future regulation of the sector could mitigate a number of the risks identified.   David Rouse FCA is an advisor with the Housing Agency, a director of the Apartment Owners’ Network CLG, and a director of one of the country’s largest OMCs.

Three years after its commencement, Construction Contracts Act, 2013 continues to provide a pathway to cash flow in the construction sector. By Pat Breen TD This innovative and important legislation for the construction sector, which was commenced in 2016, regulates payments and particularly the timing of payments under construction contracts. While many businesses in the construction sector are aware of this legislation, some businesses may not be fully aware of the detailed statutory protections and obligations set out in the Construction Contracts Act, 2013. One of the key objectives of the legislation is to provide payment certainty for subcontractors, who were considered vulnerable in the payment cycle in the construction sector. As the construction sector continues to expand, cash flow is critical and it is cash flow that is at the core of the Construction Contracts Act, 2013. Therefore, construction businesses should ensure that their payment practices comply with the terms of this legislation. I consider that members of the accountancy profession are uniquely placed to encourage construction businesses across the country to review their payment practices to ensure that they comply with this legislation. I welcome the opportunity provided by Accountancy Ireland to highlight this legislation, and a brief summary of the main provisions of the Act is set out below. Further information on the Act is available on the website of my Department at www.dbei.gov.ie. Applicability of the Construction Contracts Act, 2013 to construction contracts The Construction Contracts Act, 2013 applies to certain construction contracts entered into after 25 July 2016, but not to all such contracts. For example, it excludes: Contracts of a value of not more than €10,000; or Contracts that relate only to a dwelling of not greater than 200 square metres where a party to such a contract occupies, or intends to occupy, the dwelling as his/her residence; or Contracts between a State authority and its partner in a public private partnership arrangement. All other construction contracts must comply with the provisions of the Act and the parties may not seek to exclude a contract from the legislation under any circumstances, whether the contract is an oral contract or a written contract. Construction contracts to which the Act applies must provide for the following contractual terms: The amount of each interim and final payment, or an adequate mechanism for determining those amounts; The payment claim date for each amount due, or an adequate mechanism for determining it; and The period between the payment claim date and the date on which the amount is due. Main contracts and subcontracts Main contractors are at liberty to agree their contractual terms with their clients, subject to adhering to the mandatory provisions required by the Act as outlined above. However, if a main contract fails to fully incorporate the mandatory provisions, then the Act imposes the applicable contractual term or terms set out in the Schedule to the Act, terms which are also applicable to subcontracts. The Act stipulates that all subcontracts must at least provide the following payment claim dates: 30 days after the commencement date of the construction contract; 30 days after the payment claim date referred to above and every 30 days thereafter up to the date of substantial completion; and 30 days after the date of final completion. The date on which payment is due in relation to an amount claimed under a subcontract shall be no later than 30 days after the payment claim date. The Act permits the parties to a subcontract to make more favourable provision for a subcontractor than the above contractual terms. Payment claims An executing party – the party which carries out the work under a construction contract – is required to submit a payment claim notice to the other party no later than five days after the relevant payment claim date. If the other party disputes the amount claimed by the executing party, that party is required to respond to the executing party in writing no later than 21 days after the payment claim date setting out the reason(s) why the amount claimed is disputed and the amount, if any, that it proposes to pay to the executing party. It may be possible for the parties to reach an agreement on the amount to be paid to the executing party. However, if no such agreement is reached by the payment due date, the other party is legally required to pay the executing party the amount, if any, which the other party proposed to pay in its response to the contested payment claim notice from the executing party. This payment shall be made no later than the payment due date in accordance with Section 4(3)(b) of the Construction Contracts Act, 2013. Statutory adjudication of payment disputes The Construction Contracts Act, 2013 also introduced, for the first time in Ireland, a statutory right to refer a payment dispute for adjudication. A ‘notice of intention’ to refer a payment dispute for adjudication must be served by one of the parties to the payment dispute. The parties may then jointly agree to appoint an adjudicator of their own choice, within a five-day period. However, if the parties cannot reach agreement on who to appoint, an application may be made after the five-day period to the Chair of the Construction Contracts Adjudication Panel, Dr Nael Bunni, to request the appointment of an adjudicator to the dispute. The appointed adjudicator, whether appointed by agreement of the parties or by the Chair, is required to reach a decision on the dispute within 28 days. This period may be extended in certain circumstances.   Pat Breen TD is Minister of State at the Department of Business, Enterprise and Innovation.

Large customers are good for business, but can stretch your cash flow.  By Peter Brady Have you recently received a ‘polite letter’ from your US multinational corporation (MNC) customer advising of a stretch in your credit terms from 30 days to 90 plus? Or, indeed, from any of your MNC customers? In recent years, the extension of MNC credit terms has become business as usual across the globe but for SMEs, it is anything but business as usual. Think about it. How would an extension of credit terms impact on your cash flow and projections this year? And what are the implications for your growth strategy in 2020 and beyond? Winning a contract with a large MNC is a measure of success for established SMEs. However, an extension of credit terms can feel like a double-edged sword as it puts excessive strain on cash flow. Why does it matter? A strain on your cash flow can have many implications, all of them negative. The first impact is on your suppliers – they expect payment in 30 days. There is an immediate gap in cash flow and you are unlikely to have sufficient sway with your suppliers to realign. This could mean: You are not in a position to fund the initial costs of fulfilling contracts; Pressure is placed on your existing supplier relationships in the form of increased risk around quality, timely delivery and higher prices; Capacity to deliver on-time to customers is affected; and Ability to grow the business at pace is limited. The lost opportunity  It may seem obvious, but having cash tied up in debtors with long credit terms is a fundamental challenge for most SMEs. If SMEs could access this cash early, it would give a distinct competitive advantage when negotiating terms with key suppliers. Think of what you could do if your invoices were paid on day one, not day 90. First, you could pay your suppliers early, enhance the relationship and ultimately secure better terms. Second, you could deploy funds into driving new customer acquisition and fund new business tenders with the comfort of cash flow certainty. So what do you do? You have two options: 1. You could try to negotiate: know where you stand in your customer’s eyes. Do your products or services play an important role in their success? Is your product or service critical to their delivery? Even so, unless you are the sole producer of a key strategic element, there’s another company out there to potentially replace you. Alternatively, your customer might offer softer credit terms in exchange for a pricing discount – but cutting margins is an extremely expensive source of finance and unlikely to be recovered. This course of action doesn’t make good business sense, as it is a race to the bottom. 2. Look at funding options to bridge the gap: the financial market is developing all the time to reflect the needs of business. For decades, when Ireland’s SMEs needed to fill the cash flow gap left by extended credit terms, they had limited choices – commercial overdrafts, short-term lending or an invoice discounting facility. That may have been adequate in the past but such is the success, ambition and global reach of Irish SMEs across all sectors today, this range of funding options falls short of their requirements. Commercial overdrafts are harder to secure and are generally seen as an unreliable method of funding, not directly aligned to the changing requirements of a business. Similarly, short-term lending is onerous to put in place and comes with significant levels of conditionality. An invoice discounting facility continues to plug the cash flow gap for many SMEs in Ireland. However, invoice discounting facilities are operationally clunky and carry significant fixed and hidden costs and limitations. They are therefore not really fit for purpose for today’s SMEs. Many SMEs often have a small number of key strategic customers in their sales mix. Supported by government bodies such as Enterprise Ireland, Ireland’s SMEs have a global footprint. Exporting is crucial to scalable business success, and not just to Western Europe. SMEs are securing contracts across the globe – US, Canada, EMEA and Asia. Invoice discounting facility For years, the invoice discounting facility has serviced working capital funding requirements. However, the facility comes with three major limitations: The facility limit; Geographical restrictions; and Debtor concentration risk limits. The facility limit At the outset, SMEs are subjected to a long and onerous process to get approval for the invoice discounting facility. Fair enough, you may say, as this is effectively a loan and it follows that the bank providing it decides how much the facility is for. SMEs must enter into a long-term commitment, often saddled with non-usage charges or exit fees. SMEs must also pay credit insurance and sign a personal guarantee – something entrepreneurs have grown to fear. Geographical restrictions Exporting to the UK? Great. Exporting to United States (US)? Not so great. Country risk and the law of the land plays a major role in how traditional lenders assess the risk and granting of facility limits. If the country in which your customer is located is outside of what is considered in banking terms to be palatable, funding limits and exclusions will apply. Debtor concentration risk limits The most common reason for restricting funding under an invoice discounting facility remains customer or debtor concentration. It applies when an SME becomes over-exposed to a single debtor. The debtor could be a large household brand name, but traditional lenders must impose facility limit restrictions. For SMEs, it is somewhat ironic that the more business you do with a key customer, the more your funding is limited. So, back to your US multinational extending its credit terms. You’ve worked tirelessly to win this business, but you can’t sustain 90 days’ credit and this customer accounts for over 60% of your debtor book. Your business needs: Consistent certainty of funding, without any limit relating to geography or debtors; Funders who recognise the strength of your business model and the substance of the underlying transactions; and Access to working capital to scale your business globally. Market and product innovation Invoice, purchase order and recurring revenue trading are collectively known as “receivables trading”. Receivables trading ticks all the boxes. It enables SMEs to leverage their customer relationships. By selling invoices and future invoices (purchase orders) to a pool of capital market funders, SMEs can access finance when they need it. What difference do capital market funders make? The funders are capital market institutional funders, pension funds, corporates and sophisticated investors – and there is a large pool of these funders. The fact that there is not just one entity, but a pool of funders purchasing the receivables (invoices or purchase orders) eliminates the requirement for imposing concentration or geographic limits on the SME. It extinguishes the need for any commitment, lock-ins or fixed costs. At no stage is there an ask for a personal guarantee. This funding solution puts control back into the hands of SMEs and allows them to decide when they need to access funding on their terms – a liberating benefit. How does it work? Receivables trading is available via an online platform. A pool of institutional funders (the buyers) are members of the platform. SMEs (the seller) uploads their invoice or purchase order and the buyers purchase them. The model is ideally suited to established SMEs with MNC or sovereign debtors. The SME can use the online platform in conjunction with their existing facility by carving out specific debtors from the invoice discounting facility. In conclusion Business is constantly changing and working capital funding has caught up. Alternative funding where sellers and buyers connect directly via an online platform is fast becoming the norm. With this funding solution, SMEs can tender for business of any scale globally – confident that they can fund the upfront costs. It’s a gamechanger for most. According to the Central Bank Survey of SMEs, which was published in January 2019, the top two reasons for credit applications were working capital, and growth and development. ISME’s quarterly business survey reveals that 70% of Ireland’s SMEs still rely solely on traditional bank funding. In Europe, it’s only 30%. Alternative funding is the future of funding. Peter Brady FCA is Co-Founder and CFO at InvoiceFair.

Blockchain represents both an end and a beginning for the accountancy profession. By Fearghal McHugh and Dr Trevor Clohessy Transparency can be considered the holy grail of governance best practice. The codes, acts and markets demand it as it enhances the view of corporate transactions, which has in turn affected issues such as environmental and sustainability reporting. Transparency is the core of blockchain, which will affect accountancy while satisfying this core principle and driver of good corporate governance. The difference is that it will not take the blockchain elements outlined below as long to become mainstream as it has taken to impact on environment and sustainability concerns. The consensus is that blockchain and its technologies will change the people skills, the processes, the systems and the structure of accounting practice currently applied to any transactions involved in the recording of any information. This has big implications for those in the sector but, significantly, gives a market opportunity to those who are not. Indeed, this opportunity is further enhanced when artificial intelligence integrates with blockchain. Scale of disruption The potential disruption is on the same scale as Amazon, which competes with all retail shops in the country. The first to market with the ‘Accountazon’ brand, named here first, will dent the current position of large or small practices. Accountazon requires accountants, but the ability to scale, integrate and generate output based on fully transparent and rules-based decision-making at the lower level of processing while, at the upper level, having the decision-making and knowledge base of a collective of highly-paid accountants will affect the accounting industry. This can drive the accounting industry to build on specialisation and value proposition offerings at a higher level than those currently generating income. In other words, intelligent computer systems will do what accountants currently do. The impact will force the industry to seek a new place away from rudimentary transaction-type roles of fundamental audit and tax processes. This will require in-depth knowledge (which artificial intelligence can replace) to pure decision-making; in essence, the better the decision-making, the higher one’s revenue and reputation. The purpose and role of accountants will remain, but will be implemented at a higher knowledge application and analysis level and further away from the current operations position and perspective. A personal approach There is no need for panic yet. As with Amazon, retail shops have continued in business but the pricing, delivery, support, convenience and speed we enjoy from the online retailer may also need to be addressed in the accountancy industry; we need to make accountancy accessible, friendly, convenient, productive and transparent. Either the market or the technology will drive the change, or the accountancy industry will embrace it first and deliver value. A Ryanair approach, encouraging a more direct business model using technology, could be applied in the accountancy industry and is more likely now with blockchain and artificial intelligence. The middleman remains the accountant, however, and if it is deemed that a lot of processes don’t add value, the middleman needs to present a value proposition that cannot be offered by the system itself in order to add future value. In the Ryanair model context, so many travel agents adjusted and seem to have found that personal service, customisation and the time taken to provide a tailored travel package for customers is what many consumers want. The drive for digitisation An example of a driver of this type of change arose earlier this year when the then-head of the IMF, Christine Lagarde, urged central banks to launch digital currencies to satisfy public policy, financial inclusion, security, consumer protection and privacy in payments. While blockchain is mostly linked with cryptocurrencies, digitisation policies embraced by companies like Nestlé, Guinness and Glanbia are being encouraged by stakeholders but embraced in a controlled manner. Blockchain technology is part of the cryptocurrency system that actually worked. It is becoming embedded in many industries from manufacturing to web-based services, facilitating faster and more secure transactions on a growing scale. When companies and consumers have a better, easier, faster and more transparent way to do business, they will select it as time is a critical factor in corporate life. The practical elements and approaches to blockchain, as highlighted below, will be seen by clients as having the potential to reduce charges and the time involved in accountant reviews and advice, which Revenue could see as a means of speeding up returns. Public versus private Blockchain is not a mobile application, a company or a cryptocurrency. In its simplest terms, blockchain is a ledger that records transactions digitally and records details about the transaction. These details are recorded in multiple places on the same network. Blockchain comes in two flavours: public and private. A public blockchain allows anybody on the network to input transactions and data onto the blockchain. No single entity controls the network. A public blockchain operates like Wikipedia in that users have a composite view that’s constantly changing. Bitcoin, the tradename used to represent the familiar digital currency along with another called Ethereum are examples of public blockchains. Private blockchains work in a similar fashion to public blockchains, but with access restrictions that control who has access to the network. One or multiple entities control the network. Think of this in terms of a traditional database system that can only be accessed by specific authorised employees. Two features differentiate blockchain digital ledgers from traditional ledgers. First, the assets and transactions recorded in these digital ledgers are secured through cryptography. As an example, in season four of the Netflix drama, Narcos, Guillermo Pallomari’s financial ledgers records are taken as evidence by the Drug Enforcement Authority (DEA). However, due to the complicated coding system deployed by Pallomari within these financial ledgers, the DEA is unable to decipher the transactions and/or assets in order to use them as evidence. Pallomari holds the encryption key, which would enable the DEA to crack the code. In terms of blockchain, this also holds true. Due to sophisticated encryption keys, the transactions and assets are secure, immutable and unforgeable. Second, blockchain encompasses the disintermediation of traditional financial intermediaries (e.g. banks, brokerages, mutual funds). This disintermediation is made possible by smart contracts, which are complex algorithms that execute the terms and conditions of a traditional contract without the need for human intervention. This leads to a superior ability to prove custodianship and ownership of assets, which could potentially improve efficiency and enhance transparency while also reducing costs and income in the accountancy profession. Complexity and novelty Today, a number of multinational technology organisations enable businesses to implement blockchain practically. For instance, Microsoft currently offers a blockchain development solution that combines the advantages of cloud computing (e.g. virtualisation, scalability, pay-as-you-go pricing model) and blockchain. This service is called Blockchain-as-a-Service (BaaS) and comes with a set of development templates (e.g. smart contract development and integration) that users can deploy and configure with minimal blockchain knowledge. However, prior to diving into the blockchain sea, accountancy organisations should adopt a caveat emptor mantra. History suggests that two dimensions impact on how a new technological trend and its business use can evolve. The first is complexity, which is represented by the level of coordination required by the organisation to produce value with the new technology. The second dimension is novelty, which describes the level of effort a user requires to understand the problems that the new technological trend can solve. The more novel a concept is, the greater the learning curve. Accountancy organisations can develop adoption strategies that map possible blockchain implementations against these two dimensions. Complexity and novelty can vary from low to high in terms of the stage of technology development. For instance, accountancy organisations that are new to the blockchain concept may want to introduce a pilot initiative that is low in novelty and low in complexity. One such initiative could encompass the inclusion of cryptocurrency transactions in a firm’s transactions processes. New skills While blockchain is spread across many systems, it is not public. It protects transactions because they are shared and copied on many parts of storage devices, and would require all parts and copies of the transaction to be amended and/or deleted to have an effect. Deleting a transaction in one place is easy, deleting it from several locations and tracking each one – while not impossible – would require some work. This capability could potentially scare some in that transactions cannot suddenly be erased, but it is encouraging for others. Apply this concept first to the level of payments and receipts and build that up to management reporting, budgets and strategic reports to ensure a higher level of accuracy and clarity. This will eventually lead to a sense of integrity, another governance ideal. With reference to speed, this can move business from reliance on past information to live analysis and if it’s faster, it will be cheaper in the long-run to produce. While a positive for business, it will not require the skill of a finance professional but a computing-finance professional. In a 2018 Irish industry report, one of the authors, Trevor Clohessy, identified that IT/education providers must do more to demystify blockchain and expedite the learning process. The report outlined how the core competencies and skills required for blockchain are broader than the core technology and encompassed skill sets, which fall under the following categories: Foundational technology (e.g. cryptography, public key architecture); Distributed ledger technology (e.g. mining, consensus algorithms); Forensics and law enforcement (e.g. money laundering, dark-net); Markets, economics and finance (e.g. business modelling, cryptonomics); Industrial design (e.g. supply chain, Internet of Things); and Regulations and standards (e.g. smart contracts, governance frameworks). From an accountancy perspective, it is envisaged that certain traditional skills relating to accountancy will be eliminated or reduced (such as reconciliations or provenance assurance, for example). Blockchain transactions will enable new value-adding activities but while the range of extant skills required will change, this change need not be Byzantine. It is envisaged that the markets and regulations categories outlined above will be important for bridging the blockchain literacy gap between various business and technology stakeholders. Looking ahead, accountancy practices can examine their business models in order to derive value from blockchain. Janus, the Roman god, contained both beginnings and endings within him. That duality characterises blockchain too. It will put an end to traditional ways of doing things and usher in a new era for business and for the world at large. It will be divisive, pervasive and transformational all at the same time, and will encourage accountancy professionals to look ahead and not base their operations and decision-making on past data. The blockchain future is one with present and predictive transacting data systems with in-built transparency and integrity.   Fearghal McHugh is a lecturer in Chartered Accountants Ireland and GMIT. Dr Trevor Clohessy is a researcher and lecturer in GMIT.

Unconscious bias isn’t going away – and neither is the pressure for diverse and inclusive workplaces, writes Dr Annette Clancy. Companies are under increasing pressure to improve gender equality, level the pay gap and generally change their approach to workplace inclusion. Part of this demand stems from equality legislation, but there is also growing public pressure to act. However, research tells us that we prefer to be in the company of people who are similar to us. We assume that we will have more in common, that we will be understood and liked, and that there will be minimal conflict. Of course, most of these assumptions are in the realm of fantasy – we all know people who are very similar to us but with whom we have fractious relationships. We also assume that the opposite will be true when it comes to people who are dissimilar to us. Consider, for example, the many stories in the US media of white people calling the police to complain about black people going about their business in their neighbourhoods. Head over heels? Freud went one step further and told us that the relationship between leaders and followers was like the act of falling in love or the state of trance between hypnotist and subject. What Freud was getting at was that we are unconsciously predisposed (in our personal and work lives) to choose people with whom we have a strong emotional attachment. At first glance, none of that makes for very good practice when it comes to increasing diversity, improving recruitment practices or searching for a new job. Hiring the most qualified candidate based on their CV and how they interview for a position seems straightforward enough, but it isn’t just what’s written down or their skills that will always convince the panel to appoint a candidate. Biases based on gender, race and other factors can present unconsciously and influence the decision, even when the panel has the best of intentions. Quick judgements Unconscious bias refers to a bias that we are unaware of and is out of our control. Our brain makes quick judgements about people and situations, and our culture, experiences and background influence these judgements. Everyone has unconscious bias and although training can increase awareness, research suggests that it has a limited effect on behaviour. One of the reasons why training is limited in its effectiveness is because the bias is ‘unconscious’. One afternoon’s worth of instruction is not going to eradicate a lifetime and a society-worth of unconscious programming. What has shown some promise is holding managers, teams and companies to account for the decisions they take. Other strategies include regular discussions on bias, making it an ordinary reflection point and not a ‘once-off’ conversation that is forgotten as soon as it happens. A good starting point for discussion is Harvard’s Project Implicit Tests, which will give you immediate feedback on your biases towards a wide range of issues. Mitigating bias Biases can affect your expectations of different groups. In hiring processes, it’s important to ask if you hold male, female or non-binary candidates to different standards. Assessing candidates ‘blind’ by concealing their name, for example, is another way in which organisations can mitigate bias. Likewise, as a jobseeker, do you have biases towards particular companies that are out of your conscious awareness and may be hindering your search? Biases can also affect how you manage your staff and may be a contributory factor as to why you retain or lose staff. Do you, for example, welcome challenges to your management style? Is it possible that you harbour different expectations of male and female staff members? How open are you to questioning your own unconscious bias? Unconscious bias isn’t going away, and neither is the pressure for diverse and inclusive workplaces. Bringing both of these topics right into the mainstream might be the first step towards having the conversation.   Dr Annette Clancy is Assistant Professor at UCD School of Art, History and Cultural Policy. Annette’s research focuses on emotions in organisations.