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Brightly coloured numbers | accountingweb | The Rise of the External MD
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Going beyond the balance sheets

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The role of accountants is evolving, meaning that the industry can now offer more than just knowledge of the numbers to their clients.

14th Aug 2023
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You might have heard of an external finance director, but what about an external managing director (MD)? Not so much. Yet more and more accountants working in practice are fulfilling the traditional role of the MD, becoming more involved in their clients’ lives than ever before.

Running a business is tough. The days are long, you never switch off and the pressure of juggling is tremendous, both on the business owner and the people around them. When business owners set off along the path of starting a business, they do it because they’re good at something. 

A business owner who runs a marketing agency started their journey because they were good at marketing, not because they were good at finance, payroll, HR, bookkeeping or IT. When they choose you as an accountant, you’re in it with them. They picked you because you’re good at the stuff they’re not so hot on. But what they might not realise is how much experience and second-hand knowledge an accountant can pass on from working with thousands of other businesses. 

Not just the numbers

Traditionally accountants look back on the performance of a business by analysing numbers, but not often do they deep-dive into what drives those numbers. Usually that would be the responsibility of the business owner, which is quite difficult when you’re running the business, tied down by day-to-day operations.

Not being able to take a step back and look at the business as a whole often means it’s easy to become a busy fool with no real plan or direction, other than “we need to increase sales and decrease costs”. 

But a good accountant should help the business owner step back and think about a very important question – why? Why did they set up this business? What are they trying to achieve? Is it more time with their family? Or maybe more growth in the company? Or more tax savings in their pocket? Only once an accountant knows the answer to these questions can they even begin advising on a solution, because as we know, a goal without a plan is just a wish. 

So, what next?

Ironically, to see more than the balance sheet, you must start with the balance sheet. All your data must be up to date, every day, so you always have live information to make real-time decisions. 

Key Performance Indicators (KPI) are vital to track the progress of any company, but for accountants these are usually just financial, and we often forget about the non-financial stuff. So, it’s no good just tracking gross profit and what new clients you’ve signed in the month. Ask instead: what is driving those figures?

Is it social media posts? Or how many networking events your sales team have been to? This will be different for every business, but tracking these drivers will give you an insight into what’s working and what’s not, while keeping the team and the business owner accountable. 

In the know

Accountants are now more involved in their client’s business than ever before thanks to cloud technology. Clients have more visibility over the numbers, meaning they have more questions than ever. Yes, we are qualified accountants, but we’ve also had the privilege of working with thousands of clients, meaning we’ve seen what works and what doesn’t. Whether our clients have marketing issues, trouble recruiting or even IT problems, we might not be experts in the field, but we can still advise using our vast experience.

For the many requests and issues that come our way, there’s almost certainly going to be some we know nothing about, and in these instances, we reach for our existing client base and network. A client chooses us as a trusted advisor, and it shouldn’t be a black-and-white service with a “this is outside the scope of what we do” vibe. Problem solving and finding solutions to keep them on track with their goals is just as important, and that often requires going the extra mile.

This is only the beginning and in the past few years there has been a movement of tech-driven accountants going a lot further for their clients. Automation, real-time data and forward planning brought through by the latest tech means accountants now have more information and more time to really add value to their clients’ lives. Gone are the days of an accountant just filing your accounts come the year-end, and thank goodness for that.

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paddle steamer
By DJKL
16th Aug 2023 17:05

"You might have heard of an external finance director, but what about an external managing director (MD)? Not so much. Yet more and more accountants working in practice are fulfilling the traditional role of the MD, becoming more involved in their clients’ lives than ever before."

Once you start offering professional services beyond your formally qualified by exam or experience role how do you protect your liability status? It is not even saying something incorrect, merely the sin of omission could catch you out, if you hold yourself out as a competent MD you need to deliver on that basis to avoid later shouts of negligence by omission.

I do the role you describe , accountant, MD, but I do it as an employee, I owe a very limited duty of care to my employer, however if I offered the services I perform as a third party provider of same I would be far more open to being sued.

At the end of the day it is hard enough to keep up with accounting/tax etc areas, imagine if you were expected to keep a handle on all business issues but could be sued if you were say not up to date with employment regulation, you under insured the business because you really are a novice compared with an actual broker, you signed off on a legal process with the lawyers without fully understanding the relevance, and there are lots more- rates appeals, website creation, choose correct web hosting, contract negotiation etc etc etc

Just during today I worked through some building control issues/fire corridors etc for one of our properties and then later checked a site plan for first registration of a site at Land Registry to confirm to our solicitors it was correctly drawn

I deal with all of these areas and more as an MD, I doubt I get them all 100% right but I offer none via a billed service, my incompetence is covered because I am an employee.

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