How did it start?

Like most things, as a chat in a bar! The head of a business advice consultancy just happened to say, "the other day the managing director at one of my clients had asked if accounting actually added any value or was just a necessary evil!"

Well it wouldn't be the first time such a fundamental (and uncomfortable) question has been asked and it got us thinking how we could prove the case of accounting to such non-believers. "Why don't we put 'accounting' in the dock perhaps as a mock trial and accuse it of not accounting added value to industry?" suggested one of the fellow drinkers.

And so one night we set up a mock trial complete with a judge and jury as an event for members of the local CIMA branch and accounting students. Whilst the proceedings and the arguments of prosecution and defence had to be staged-managed somewhat to fit within two-hours the outcome was not quite as the initial script had suggested. see 'court case' to see who was involved and the main elements of the case for and against.

The outcome was an 'honourable draw' (just!) but nevertheless the course of the debate had raised some searching questions about how managers actually perceive the all embracing role of the financial function, for example,

• How can accountants support managers in running the business (adding to the score) and at the same time simply keeping the score and being the financial conscience of the organisation?
• "Why do accountants always say NO!"
  

And one thing let to another!

We then decided to look at these issues in more depth as a formal research project kindly supported by the ACCA's Educational Trust.

Our quest was to understand how financial functions are organised in practice and what issues confront accountants within their own organisations.

The initial issues for the research project

• Terminology - 'accounting, finance and financial' are used synomously.
  
• Multiple roles in single financial function - how to explain and cope?
  
• Dual purpose - scorekeeping v. scoremaking
  
• Role conflict - why does it arise?
  
• Accounting v. accountants - are accountants necessary to do the accounting?
  
• Perceptions of users – necessary evil or valued business partner?
  
• What will the future bring?

And what do we know now?

Our main finding is that Financial Directors often have a good deal of difficulty in justifying their functional role(s) to increasingly questioning management boards, especially when the spectre of outsourcing is raised. See introduction to context below.

We have suggested some ways of thinking about the various roles of the financial function in generic terms so that the financial team can both develop their skill-set in a changing world and better articulate their role(s) to the users of accounting information.

click 'news and findings' to see our articles and conference presentations.

We hope that accountants, non-financial managers and students alike, will find the site interesting and useful.

Professor Richard Wilson, William Murphy and Ian Herbert - September 2005 (for backgrounds see research team)

This project is supported by the Association of Chartered Certified Accountants

An introduction to the context of accounting

The environment that organisations operate within is changing and in most organisations this is having implications for the way in which the financial function needs to think about the service that it provides.

Many management boards are now inclined to question the contribution and cost of every activity and the financial function is not an exception. The possibilities of moving to third party outsourcing or inhouse shared service centres provide an opportunity, and a benchmark, through which to question the role of the financial function in quite fundamental ways and make a judgement call on whether value added exceeds cost.

The project set out to understand the changes that are taking place, what factors are driving them, and how the compilers and users of financial information might work together to create value for their organisations.

A key focus was how accountants might add greater value to their organisations through the provision of information to encourage more efficient use of resources and more effective strategic planning.

A central theme of the research is the 'communication of relevant information to a variety of users', the researchers havel attempted to 'practice what they preach'. Hence, the findings of the research are being made available via this website in a user-friendly manner and as a free resource, to accountants, students and the users of financial information.

There has been a good deal of relatively informal coverage of the changing role of the finance function in the national press, the professional press and in presentations made at a variety of conferences. However, there is little by way of focused guidance to provide a greater understanding of which steps should be followed in order that the finance function (broadly defined) might add value in enhancing organisational effectiveness.

Moreover, there is much academic literature, to suggest that developments in the general practice of accounting have not kept pace with developments in academic theory and knowledge. The views espoused in the late 1980's by Johnson and Kaplan in Management Accounting: Relevance Lost, (together with Johnson's sequel, Relevance Regained: From Top-down Control to Bottom-up Empowerment), still provide a fundamental challenge to the accountant's role. Both of these works tend to set accountants as de facto supporters of the traditional top-down orthodoxy of managers: seeking to control and command subordinates, rather than as enablers of an information rich and empowered organisational environment.