SLYOU Magazine Issue 1 | Page 18

BUSINESS CORNER By Allan Haynes This article is written based on my personal experience as a professional accountant working with several accounting firms in Barbados and several local, regional and international companies across the Caribbean and not on any scientific survey conducted. The focus of the discussion surrounds the operations of medium-sized private sector retail firms across the region. Financial Management relates to the planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization. This definition was taken from the web site businessdictionary.com. The Past vs. Present When I first entered the accounting profession, most companies did not have a qualified accountant. The financial functions were performed by individuals who would have had a basic secondary education, and the external Financial Statements -- provided only at the year-end -- were prepared by the external audit company. This has changed significantly in recent years with Barbados, for example, having over one thousand registered members of the Institute of Chartered Accountants at May 2018. Consequently, most medium- sized and large companies now have at least one employee with a professional accounting qualification who is charged with the responsibility of reporting to the management on a monthly basis. These accountants also prepare the annual published financial statements for the auditors to sign. In the early part of the 1980s, the main financial reports were the Income Statement and Balance Sheet. These reports continue to be essential aspects of the reporting function, but in recent years the cash flow statement has been gaining credence as a management tool. In the past, most accounting functions were performed by the accounting department with the general ledger being updated exclusively by the Accountant. However, today there has been a decentralisation in the accounting process. At present, there are employees in the warehouse who receive inventory and cashiers and sales employees who generate entries into the General Ledger without any intervention from any accounting employee. These entries can affect Sales, Purchases, Cost of Sales, Receivables, Cash and Bank. This clearly illustrates that in the present environment non- accounting employees can have a major impact on some of the largest items in the Balance Sheet and Income Statement. This change requires that these non-accounting employees have some training and knowledge of accounting principles and practices. 16 SL-YOU | Business, People & Lifestyle In the past, variances were generally reported against the prior year; however, recently there has been a trend to compare with Budget. The Budget has also moved from Fixed to Flexible, therefore there is more of a “like for like” comparison with actual performance. Companies now spend more time in preparation of the Annual Budget which can take from as few as a couple of days to as many as months to complete. The Budget is normally approved at the level of the Board of Directors. Companies are now using the computer more extensively in the management of financial resources in recent years. This trend has allowed entities to prepare more accurate, timely and detailed financial information. It also facilitates sensitivity analysis and therefore provides more useful information to the financial decision -makers. In recent years, the Caribbean has experienced some challenges to the business model related to the profitability of medium-sized companies. 1. The first challenge is linked to the change of ownership of buildings. Prior to the 1990s, most businesses owned the buildings in which they operated. Therefore, the entities had both landlord and commercial profits in their companies. After the 1990s, several pension funds and other investors acquired these buildings. Therefore, companies lost www.slyoumag.com | July-August 2019