Having fun and learning the fundamental principles of accountancy are rarely
concepts which appear in the same sentence. Certainly my early days at the
tutors were far from fun. Exasperation on both sides was the norm. The only fun
came when one tutor taught an entire hour of tax law while impersonating WC
Fields, the misanthropic Hollywood comedian of the 1930s. That tutor went on to
become chairman of the Conservative party.
Part of the problem in those early days was that we were off and running with
much more interesting things like corporate fraud or detecting stock
irregularities long before we had got the hang of the underlying accounting by
which a company stands or falls.
As Robert Bittlestone, chairman of consultants Metapraxis, was telling us the
other day it is rather like learning to ride a bicycle. When a child first looks
at a bicycle and thinks about the theory of riding it the whole concept seems
impossible. But once the skill has been gained not a single further thought is
given as to how it is done.
If only, thought Bittlestone, a similar liberating step could be made in
accounting, then business life would become much more fulfilling and less
fraught with dangers. If the underlying principles could be learned through some
visualisation process then the leap could be made. And from then on in, with an
instinctive understanding of the accounting essentials of business in their
minds, accountants could simply concentrate on strategy rather than lurching
from one frantic burst of fire-fighting to another.
Flights of fancy
Bittlestone and Metapraxis are experts in the field of visualisation and so they
set about producing a solution.
And at the end of February, in conjunction with management accountancy body
CIMA and the British Computer Society, they launched the idea onto an audience
of sceptical journalists, grizzled old businessmen, and bright young trainees.
The system is known as the
Put simply it is an online game which simulates a business as it runs. It
comes across as a complex plumbing diagram, the sort of thing which would
diagnose where your central heating had broken down.
But instead it is the cash coursing – or not coursing – through the business,
which is the key.
The company simulation can run at any speed you like and through years of
operations. And it portrays the relationship between cash at bank, debtors and
rate of receipts, creditors and payment periods, fixed assets, stock,
investments, bank loans, advertising, staff numbers, undistributed profits,
share capital, depreciation, capital spending and so on. The graphs alongside
show operating profit, or the state of the profit and loss account, balance
sheet and, most important of all, cash flow as it unfolds.
Initially, it is slightly baffling. But it is easier to learn lessons
visually than from a page. As Bittlestone said: “A visual approach using
business simulation techniques quickly gives managers an intuitive understanding
of the very simple relationship that exists between reported profits, actual
measured cash flows and the assumptions about value that are attached to
business assets. This basic relationship is at the heart of all business and it
has been the crux of all the financial collapses we have experienced in recent
And it is this emphasis on cash which Bittlestone felt was the big advantage
to come out of the intuitive approach. The paradox of companies showing record
profits and then going bust would become less of a paradox if managers gained an
intuitive understanding of how things worked.
Traditionally, the basics of accounting have been left to the accountants.
Managers from other disciplines dutifully go on ‘finance for non-financial
staff’ courses. But it tends not to stick. And the growing complexity of
financial reporting has given non-accountants in companies an even bigger excuse
for not trying to understand how it all works. If it is complex to the experts,
then just leave it to the experts, is the easy and increasingly common way out.
Taking the controls
But what Bittlestone wants to see is what he described as “democratising the
very simple cash principles of the corner shop”. To that end he sees a critical
mass being achieved within companies. Not only would trainee accountants use the
game between themselves or as part of formal training, but it would also catch
on among other people within the company who are far from the accountancy career
route. The real change would come if enough people across a business understood
the fundamentals of accounting in an intuitive way. It would create a revolution
where everyone understood the nuts and bolts and could spend their entire
business lives looking to the horizons rather than constantly stumbling over the
details at their feet.
But in the meantime have a go yourself. As we discovered at the launch, it is
a lot of fun.