With the Covid-19 pandemic throwing the business world into turmoil, professional accountants are demonstrating just how much they can help in times of crisis
This article was first published in the June 2020 UK edition of Accounting and Business magazine.
Jane has long wanted to start her own business and now has an idea that could make her fortune. She turns to her accountant for advice on setting up the company, finding investment, getting the right invoicing system in place, and making sure the books balance.
One year on and the business is going well, so Jane decides to take on staff. Her accountant advises on payroll and ensures the right amounts are paid at the right time, including tax contributions.
The business continues to grow into its third year, and Jane is developing more products and services. Her accountant advises on research and development tax reliefs. And as she is now also working internationally, the accountant helps ensure she complies with all import and export requirements.
A few years on with a now very successful business, Jane’s backers are looking to realise their investment. The accountant advises on the options: trade sale, flotation or sale to other investors. At the same time, Jane is concerned about the impact her business is having on the world around her. The accountant evaluates her non-financial position, advising on environmental, social and governance issues. And when the unexpected happens, like the Covid-19 outbreak, her accountant will be there to advise on the best way forward.
Where would Jane be in a world without accountants?
Imagine capital markets without finance professionals. Jane’s investors rely on company accounts when assessing where to invest. These accounts need to be accurate in order to give a true and fair view of the financial state of the company. Who else apart from accountants would be qualified to prepare these accounts, abiding by a set of principles and standards that ensure they provide a meaningful picture of financial health?
And, of course, ‘external accountants’, or auditors, further mitigate the reporting risk. Jane and her investors value an independent set of accountant eyes, which add to the checks and balances. Imagine a world without auditors, those specialist accountants professionally trained to provide that independent layer of financial scrutiny.
Without such scrutiny, the capital markets, vital for business investment, would cease to work in any meaningful way. They would become a Wild West, frontier towns where the only rule is that there are no rules. An investor might get lucky and strike gold, but they would more likely return home empty-handed.
But it is not just Jane’s business and her investors that benefit from accountants. Imagine how government spending would be controlled without accountants. Who would be able to say how taxes paid by Jane and her company were being spent? For that matter, who would be able to say how much the government had raised in the first place through tax or bonds?
This is as true at a local level as at a national level – without accountants, there would be no checks and balances to counter political whims. Whether providing funds for schools, repairing potholes or building the infrastructure that allows businesses like Jane’s to flourish, local government projects could run out of control without the financial discipline provided by the accountancy profession.
Tax collection itself relies on accountants, in finance ministries and revenue collection agencies. Tax policy requires input from tax accountants to ensure it will work and achieve the desired outcomes. And if the current tax code appears complicated at the moment, imagine what it would be like without accountants to interpret it.
If the worst happens and Jane falls victim to a scam, what then? How can fraud be fought effectively without forensic accountants? Following the money is a key accounting skill – illegitimate bank transactions, money laundering and tax evasion can all be identified by accountants.
Fraud’s bedfellow is corruption. Whether that involves bribing directors to secure a lucrative contract, government officials to influence public policy or customs officers to look the other way, at the forefront of the anti-corruption effort is the accountant. Who else would be able to investigate when something does not look like it adds up.
Beyond the numbers
The skills needed to balance the books can also be put to good use elsewhere – anywhere there is the need for measurement and evaluation. Accountants have long been in the business of measuring environmental impact, and will continue to perform an essential role as governments and industry grapple with climate change.
If something cannot be measured, it does not get changed. Professional accountants have the skills not only to measure the non-financial impact of economic activity, but to guide individuals, businesses and governments towards making better decisions. They can advise on governance structures, social and environmental impact, assess risk and ensure all stakeholder concerns are addressed.
In short, accountants underpin global sustainability. Jane’s world would be a very different place without you.
Philip Smith, journalist
"Without accountants, capital markets would become a Wild West – frontier towns where the only rule is that there are no rules"