Let me start at the beginning so that you can see where I come from on this question of the need for and the value of the use of professional accountants in SMEs (Small and Medium Size Enterprises) and Start Up enterprises

When I had completed my engineering apprenticeship in the Royal Navy I happened to pick up a book that I am sure had some title like ‘Simple Accounting’. At the time I had no interest in matters of finance other than what I was earning and how it was spent but in flipping through the book I caught some items that looked interesting. I had time to spare and started to read about the history of accounting and how double entry bookkeeping evolved. It was interesting but not my thing at the time and I never got further than what was meant by ‘books of account’. What did strike me though was that there was a language to be learned if I wanted to go any further. Debit and Credit were classifications of transactions that were not necessarily logical according to the meaning of the words. Nominal accounts, Ledgers and Journals seemed to look like similar documents but with very different uses in the scheme of things. I never was much use at languages so I lost interest

Fast forward to a time when I was first involved with the management of manufacturing engineering at Burroughs Machines. (If you are interested in my complete background and career then that is elsewhere).  At Burroughs we manufactured hard disk drives almost 1m in diameter, 38 inches to be more precise, and part of my responsibility was to make the case for investment in new tools. I worked closely with the company accounts department, yes, a whole department that represented about 2% of the total number of employees, but in those days we were only just starting to use computers. After all, that was Burroughs’ business! I found out quickly that I would need to learn the language of accounting otherwise I would never know the reasons for decisions being made. Yes I could have used the formula to understand the ‘burden' that a project would need to endure, the ‘contribution to gross profit’ that the project had to provide and the various aspects of the ‘cost of ownership’ of the ‘assets’ that would derive from the project. All this to arrive at the ROI (Return on Investment) and to be able to make the calculations to finally show that the money would be better invested in a local bank than spent on the project, or to put it in 'accounting jargon ', the DCF (Discounted Cash Flow) !!

I set about learning about accounting and first found out what an accountant is – he, or she, is the person who can tell you in six month’s time that you went out of business yesterday. Very true at the time but still not far out today probably by merely changing 6 months to 3. Furthermore I found out that on their first day at college, accountants are taught how to shake their head and say no at the same time !

But it was a necessary evil because what I learned at Burroughs I was able to start with when I was appointed Managing Director of Semtech Limited, a company that I was very proud to have been given the responsibility for starting its European subsidiary in Scotland. It made a lot of sense to appoint the same auditing firm for the daughter company as was already employed by the mother – ie Arthur Andersen. Oops you might say, ‘aren’t they the load of crooks that went down with the Enron scandal ?’ Well the company name was right but the people we dealt with were different and although there were a couple of things that happened when I was eventually made President of the mother company and then dealt with the Los Angeles office of Arthur Andersen, there was never a question of ‘creative accounting’ in Scotland – we were not big enough !!

So I quickly learned the gobbledygook of accounting and was able to talk on equal terms with the various people who were involved in the eventual audit not without some interesting arguments

One thing I found was that no two businesses are the same, whether it be the market they try to satisfy, their product, their operational methods or their people - there is always a difference - yet an accounting firm will claim to be able to carry out an audit without fully understanding all the aspects of an enterprise's operations. In my case I had a hard time convincing my auditors that we would operate without the aid of Government Capital and Employment Grants since one of the objectives of the Company I had been tasked to set up was to have it self sufficient - but everyone else takes it (the grant money) so if your Company goes bust, as 3 out of 5 did in those days, there is less of a loss for you !!! In my naivety I had always thought that the purpose of Government support was to provide facilities for start up enterprises that would otherwise not be affordable in the short term. Our Business Plan was clear - become self reliant within two years by increasing sales in Europe and providing the necessary cash to pay for the investment and grow the Company. To the accountant the easiest way to get such cash was by way of the 'free money' available from the Government - doing the business seemed to be a secondary consideration. They also could not understand that I needed some idea of the cost of their audit before it was carried out !! They had never dealt with a Request for Quotation until I came along

The operation in Scotland was very successful and I was asked to move to California to become General Manager to help put the mother company into a better shape. At that time all of the profits being made by the Company were coming from Europe and they were being negated by losses made elsewhere. It was a dilemma for my family and I since our daughter Natalie was 5 years old at the time and we did not want her to be brought up as a California Valley Girl. The opportunity was attractive so we agreed to go for two years. As it was I was made President of the Company after about 6 months and I stayed for more than three years whilst a successor was appointed. During this time I gained more experience with accounting, albeit American style

On my return to Scotland I spent some time looking around to see what new opportunities were available. This was at the time when 'just in time' (JIT) was a new fad in the manufacturing industry and I helped to form the JIT Club that the then Scottish Development Agency was keen to establish. It soon became apparent that Scottish Industry would be held back from any attempt to move forward by adopting the principles of JIT simply because the 'accounting requirements' would be almost impossible to meet. These took the form of a return on investment which, at that time, was considered by the accounting profession to be needed to be achieved in no more than two years and the discounted cash flow which used bank interest rates as a reference. I argued that providing improved products faster and to satisfy a growing world wide market to stay competitive could not be measured in monetary terms yet formed a major part of the benefits that had to be considered. This is what the accountant knows as 'intangibles' but would never consider them in the justification exercise. The whole scheme failed and with it many of the Companies that were involved in those early JIT meetings

I was fortunate to have been invited to help with the establishment of several European subsidiaries and have been involved in voluntary organisations. In all cases I was able to see first hand the effects of the accounting requirements on the business and just how unnecessarily arduous it became to the entrepreneurs who were trying to set up and expand their business

I decided then that I would set out to help smaller Companies to do without the need for accountants in their business decision making and that is where we are today

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Last Update 28-Feb-2010

Date first published 15-Oct-2005