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Do you understand your financial well being?

A couple of conversations over the weekend have prompted me to return to the way businesses account for financial transactions and the management information they generate. One thread is a very common one I have seen over the years and relates to the “awful” accounting department that works 12 hour days and weekends and still doesn’t provide the information management want in a timely manner. The second was a more contentious issue relating to the play-off between commercial realities and understanding the business down to the exact penny.

Looking at the first, there can be a whole raft of reasons why an accounting department is working long hours and seen as the bane of managements’ life from poor management, under manned & under qualified teams, to the production of too much unused information. Inefficient accounting departments lead to mistakes and errors, late and inaccurate information, and low morale and high staff turnover. Organisations can not afford to run inefficient accounting departments as this area is core to running and understanding the business, and as I’ve said previously if information is late or incorrect business decision making is ineffective.

I have seen instances where accounting departments and related systems are run very efficiently and staff numbers and qualifications are exactly right for the size of business. What often happens, which causes the real time pressure, is management information creep. As organisations grow and become more complex management want to see data analysed and presented in different ways, which is all part of a growing and maturing business. What is forgotten is the accounts team is still producing the original basic information in addition to the new requirement and as demands grows for new information pressure grows on an overstretched accounts team.

Ask yourself; when was the last time you objectively looked at your reporting pack and took out the pages you never used? There are accounting teams throughout the land producing information for management which is never looked at or used to run the business. Regular house keeping of management information requirements can keep your accounting team sane and ensure you get accurate information on time in order to run the business.

Turning to commercial reality versus the granularity of information; each case needs to stand on its own merits. There is no right or wrong answer. Take a manufacturing concern that makes tools for the building trade and one of the builders they supply does some work for them – often there would be an agreement to reduce the cost of the building work in return for a reduced cost of tools. Where there is a common benefit these trade-offs always exist.

The problem arises when these “manufactured” costs are used to report information and there is a lack of clarity around the interpretation of the data. If these costs were used in a pricing model, the resulting price is likely to be lower than the market would expect. If they were used in reporting profit and loss there could be a glitch as the barter trade would not necessarily reflect an exact penny for penny trade-off.

There needs to be a clear understanding of the impact of this kind of trade, the importance the relationships have on the business, and the type and size of the organisation. From a financial point of view these commercial transactions are part and parcel of the financial well being of the business. From the managements point of view, there may need to be a requirement to reflect the true market pricing in certain calculations but I would argue this is only really required where the size and/or frequency of the trade-offs are significant to the business and its competitive positioning. The key is to understand the importance of these relationships to the business and the financial benefits derived from such trade-offs.

What is critical to both these discussions is the basic accounting systems must be accurate and be capable of reflecting the true financial well being of the business upon request. If this is not the case and accounting teams are working long hours you have real problems. And if the financial benefit of barter trades is not well understood by the organisation your financial well being could be misinterpreted and decision making could be impaired or unsupported.

Starter :

Javelin Speared Asparagus Soup

Ingredients

2 tbl spoons of Olive Oil

2 Large Echalion Shallots Finely Chopped

1 Clove Garlic Finely Chopped

400 g Asparagus Spears

500 ml Rich Vegetable Stock

Salt and Pepper to taste

4 Table Spoons Crème Frech

Preparation method

1. Heat the olive oil in a saucepan over a medium heat. Add the shallot and fry for four minutes, until softened. Add the garlic and fry for a further 1 minute

2. Add the asparagus and cook for another two minutes.

3. Add the stock and bring to the boil. Season, to taste, with salt and freshly ground black pepper and reduce the heat to simmer for 5-7 minutes, until the asparagus is cooked through.

4. Add the crème frech  and blend with a hand blender until smooth.

Main course:

Runner Bean parcels with Olympic swimming seared Tuna and Jersey Potatoes

Ingredients:

1 Tuna Steak per person

Olive Oil

5 or 6 New Jersey potatoes per person

100 g of Runner Beans per person

100 g Chives – cut long

1 clove Garlic

50 g Butter

Method:

1. Put  the new potatoes In a saucepan with boiling water and cook on a medium heat for 12 minutes.

2. Whilst the potatoes are cooking Blanch the Chives in boiling water.( Insert for 3 minutes into boiling water) Prepare the runner beans and tie them into parcels with the softened chives

3. Steam the Runner bean parcels for about 5 minutes

4. Heat the Olive Oil Till Hot and Sear each Tuna Steak for 2 minutes on each side. Depending on the thickness of the steak – it should leave a little bit of Pink meat in the middle.

5. Chop the Garlic Fine and heat gently in a Pan with the butter till melted.

6. Serve all together and Use the Garlic butter as a dressing over the Tuna and Beans

Dessert:L'ile Flotante served with golden canoe biscuits

(Serves 4)

For the meringues

6 organic medium egg whites

Juice of 1 small unwaxed Lemon

120g golden caster sugar

1 ltr whole  milk

Seeds of 1 Vanilla Pod

For the custard

10 medium organic eqq yolks

85g golden caster sugar

2 tbsp cherry Liquor

For the caramel

50ml water

100g caster sugar

Poaching the meringues

· Place the egg whites into a clean bowl with a squeeze of lemon juice.

· Whisk to soft peaks then add the sugar a third at a time, whisking all the time

· Whisk to firm peaks

· Put the milk and the vanilla  into a large shallow pan and bring to the boil. Reduce the heat to just below simmering.

· Using two tablespoons dipped in hot water, scoop out 8 quenelles of meringue and drop into the simmering milk.

· Cover with a lid and poach for 7-10 minutes, carefully turning them over halfway through.

· Remove with a slotted spoon and leave to drain on a small tray, reserving the poaching milk.

· Place in the fridge and chill until ready to assemble.

Making the custard

· Place the egg yolks and caster sugar into a mixing bowl, and whisk together lightly. Strain the reserved meringue poaching milk into a clean pan and heat until nearly boiling.

· Pour over the egg yolks whisking all the time then pour back into the saucepan.

· Place back on the heat on a medium heat and stir continuously with a wooden spoon until the custard begins to thicken and coats the back of your spoon.

· Pour immediately into a large serving bowl, add the kirsch and cool over a bowl of ice

To assemble the dish

· Place the poached meringues on top of the cooled custard.

· Place in the fridge and chill for up to 24 hours

Making the caramel and serving

· Pour the water into a straight-sided sugar pan and then add the sugar and cook over medium heat until dark golden brown.

· Dip the base of the pan into a bowl/pan of cold water to stop the caramel cooking on.

· Spoon over the chilled meringues and serve immediately

Golden Canoe Biscuits:

Ingredients

130 g soft butter unsalted

60 g golden castor sugar

130 g plain flour

60 g cornflour

Preparation method

1. Cream the butter and sugar together in a large bowl until pale and fluffy. Add the plain flour, corn flour and salt, and stir well until the mixture is smooth and uniform. (I find it easiest to keep pressing the mixture against the side of the bowl to mix it.)

2. Bring the mixture together and Roll out.

3. Cut into Canoe Shapes

4. Preheat the oven to 170C/325F/Gas 3.

5. Bake in the oven for 30–35 minutes, or until pale golden-brown.

6. Remove the shortbread from the oven and sprinkle over some caster sugar. Leave to cool in the tin for a few minutes before removing it from the tin and cooling on a wire rack.

D

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Worth watching we think.