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