Edition 171 – Why Accountants are Lousy at Business

A good client of mine emailed me a few weeks back. One of his customers, a large, multinational, issued the edict that their supplier payment terms were going out to 90 days from 1st July, 2019.

Now, in my opinion, this type of behaviour is unethical on so many grounds.

The multinational is a listed corporation, based in the US. It boasts on its website of the thousands of staff it has and the billions of dollars in turnover it generates. It even professes to a statement of values, covering environmental responsibility, care for their employees and doing the best for their shareholders – just not, it seems, giving two hoots about their suppliers.

They’re not alone, by the way. A very large US based technology company has 120 day payment terms for its suppliers – appalling if you are a small family business providing goods or services to this company.

My client’s response to the multinational was that, if you’re looking to drag out my payment terms, I’m going to need to review the fees I charge you, so that I am not out of pocket.

So, I’m happy to give you an extra 30 days credit – but you might be paying 10% to 20% more than what you’re paying on your current 45 day terms.

The heart of the issue is this – some dimwit financial accountant in this large multinational made this recommendation to the board in order to bolster the cash position of the business. Pure and simple.  However, and I know this as I’ve hung around the accounting traps for a long time now, most accountants are actually very ordinary at business at best – and lousy at worst.

Accountants are great at the numbers – reporting them, interpreting them, forecasting them.

But they’re not that good at the stuff of business. In actual fact, in my opinion, most accountants should never run businesses.

What? Did he just say that?

Yes, most accountants should never run businesses – because not that many of them are risk takers. As such, they’re out of sync with most of their entrepreneurial clients, who are definitely risk takers.

If things get tight, accountants want to cut costs. It’s their default position as it will help to improve the numbers.

Instead, they should be focussing on:

1. Why are things tight?
2. What is it telling us about what is happening in the business right now?
3. Are we wedded to old products or services that we need to update or offload.
4. What new markets should we be going into?
5. What new products could we be developing?
6. Does what is happening now in business give us the opportunity to head off in a completely new direction?

When I work with my clients, I want to help them envisage the future – then build it. I don’t want to be focussing on what “has been”. You can’t change that. Sure, you can learn from it. However, 30 years of operating in this space has proven to me we learn more from what we’re doing today (whether it works or not) and what we’re planning on doing tomorrow, next month and next year – not what is, in essence, ancient history.

Who is helping you to plan and build a different tomorrow for you, your family and your family business?