WeBlog

Sorry, been a bit quiet here.

I’ve been working on a client, where they have been having major problems with one supplier issuing invoices for services not rendered. On investigation, it seems that the selling teams are paid a bonus based on invoices and not based on actual payments. Hence they are raising invoices etc, and hoping that my client will just pay them!

It shows the importance of making the person getting the bonus for sales to be responsible for cash collection. They are often in the best place to achieve it (particularly where Accounts Receivable has been out-soured) and it also helps ensure this kind of thing does not happen.

Accountancy Age is trailing a report by PWC saying that company board rooms do not have sufficient IT knowledge. They may be right, but in many ways this is not the problem. The problem is that board members are frightened to ask IT questions for fear of the answers or a belief that it is too technical. It's not, the role of a board member (particularly non-execs), is to ask questions and make sure they understand the answers.

The physicist Richard Feynman once said "If it can't be reduced it to freshman level. That means we don't really understand it.” Something that is too true of IT.

This might seem like an simple question, but the correct answer is not to slow them down, in fact it is to allow them to go faster!

What many people don’t understand is that only if they know they have control of their car (i.e. their brakes work), would people dream of allowing their car to accelerate. So it is with organisations, only when an organisation knows that it can control its speed and direction will it take the risks necessary to reach its goal in as quick a time as possible by going putting it’s foot on the accelerator.

This needs to be the attitude taken to internal controls within an organisation. They are not an activity that stops the company from going where it wants to go, they give management control, so that they can slow down when they need to, and thus allow them accelerate when it is safe to.

Equally, when a car tries to accelerate, you do not throw the brakes out in order to make the car go faster, instead you know how to release the breaks.

However, those working in internal controls in an organisation face a real challenge, in order to act as an effective control on an organisation, they cannot be just a permanent break, or the car will never accelerate and reach its destination. Instead they must function how we are taught to drive a car, breaking early and smoothly..

This involves all the key skills of driving: effective training, learning from experience, reading the road ahead and not just where you are, and not being distracted. Those designing, implementing and operating controls in an organisation, would do well to consider during their working day, would I drive like this on the way home?

KMPG today issued a warning to companies about Data Protection.

'Transitional Relief’ exemption that applied to files created prior to the Data Protection Act 1998 (DPA) will come to an end in six months' time.

Organisations with large amounts of paper based records will struggle to comply with simple requests from members of the public who want to know who has access to their personal data, whether it is accurate, and gain confirmation that it is stored securely.

Interestingly, many companies seem to not have noticed this risk, increasing the danger of loss of reputation and possible fines.

Data Protection is one of those areas that are growing in importance. Companies have to pay attention to it, because the reputational damage can be very bad. Hopefully warnings from companies such as KPMG will help raise awareness.