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Management

Corporate governance - the Higgs and Smith reports

The Higgs' report on corporate governance and the accompanying Smith report on audit committee reform have both been released to a generally favourable response.

Both guidelines will feed into a new Combined Code of Practice for British companies, and will have far-reaching consequences for corporate UK, especially in the area of non-executive directors.

Click on the link below to read all the about these two new reports.

Source: Higgs' special report, AccountancyAge.com January 2003

axiom-e comment: Although the reports by Derek Higgs ("Review of the role and effectiveness of non-executive directors") and Derek Smith ("Audit Committees: Combined Code Guidance") focus on the corporate governance of listed companies, a lot of their comments are equally appropriate to smaller businesses.

For independent advice, consider engaging one of axiom-e's portfolio directors. Click here for more details of how axiom-e can assist your Board.

Do you have what it takes to be an entrepreneur?

Is there a common set of characteristics that define success? Executive coach Helen Hughes highlights ten traits of top entrepreneurs.

    * They have vision A vision is by definition as Anita Roddick said "Something no-one else can see." They have a vision of what they want to create or make happen in the world.

    * They have exceptional clarity They know EXACTLY what they want and exactly why they want it.

    * They focus on the important They focus their effort on the "critical few" tasks not the "trivial many" that keeps so many busy being busy.

    * They take action They do something each day that moves them closer to making their vision real.

    * They keep their minds on what they want and off what they don't want - action follows thought.

    * They expect to succeed Positive expectation keeps motivation up - they think of the reasons they might succeed and not why they won't - they don't dwell on mistakes.

    * They are great at "self management" They manage their time, energy and character to get the best possible results.

    * They recognise their brilliance They know that 20% of what they do gets 80% of their results. They know what they are brilliant at - and do it.

    * They enlist others They know they can't do everything so they surround themselves with people who have other strengths and delegate to them.

    * They love what they do They are not driven purely by financial reward but by something more - a passion for what they do.

Helen Hughes is an Executive Coach and runs the international Achievers group development programme in Northern Ireland. Contact her on hchughes@talk21.com

Source: Helen Hughes, "Generation Entrepreneur: whatever it takes...", Flying Colours Issue 1, January 2003

axiom-e comment: There is much debate about the key characteristics of entrepreneurs and whether good entrepreneurs make good managers. Whilst the above traits may be common to a lot of entrepreneurs, they may not be sufficient to make one an entrepreneur!

A study to assess what traits a potentially successful entrepreneur requires is currently underway by Transitions who are market-testing an instrument for profiling the entrepreneurial potential of individuals and teams, prior to its commercial roll out in the coming months.

Directors - be on guard

UK directors have been warned to remain on their guard as the uncertainty continues over the exact meaning of the Sarbanes-Oxley legislation. Chris Pierce, deputy director of director development at the Institute of Directors (IoD) said the organisation was 'disturbed at some of the wording of the legislation'.

Following the passing of the Sarbanes-Oxley legislation, the Securities and Exchange Commission has published guidance in a bid to clarify its exact meaning. (For more details of the revised filing rules and other measures see www.sec.gov). Many UK companies are subsidiaries of US corporations. Directors of such companies need to be particularly aware of the possible implications of the legislation for them. Directors are being advised to take legal advice before signing or certifying any statements. Experts are suggesting that those required to sign should not do so until the last possible moment. Chris Pierce said: 'We are quite surprised by the size of the fines and the level of imprisonment associated with the legislation. As the US law stands you could face a far lower level of punishment for killing your accountant than signing a piece of paper erroneously stating your accounts are fair and reasonable. There is a concern that this is a knee jerk reaction to the a total collapse in confidence among the US general public in US corporate governance.' And it seems Sarbanes-Oxley may not be the end of the affair. Corporate governance experts are warning that further US legislation on this issue could be on its way. At the same time the European Commission is expected to produce its own directives on corporate governance which will have to dovetail into the UK's White Paper on the Company Law Review (CLR). Source: "Directors - be on guard", finance-now.co.uk 13th September 2002

axiom-e comment: The UK's "principles-based" approach to accounting standards is superior to the USA's "rules-based" approach. It is unfortunate and unfair that, following the Enron debacle, pressure is being brought to force UK companies to comply with ill-thought out USA legislation . It will be interesting to see how this affects the introduction of International Accounting Standards for UK companies which the EU has been championing.

Document retention strategies need attention

Companies are being advised to consider their document retention policy as part of their overall corporate governance strategy. Recent document shredding scandals have highlighted the need for companies to operate effective document management measures.

Document strategy expert Mike Frankham, head of document solutions at Pitney Bowes Management Services (PBMS), says UK companies are currently faced with a proliferation of information that is clouding the issues surrounding document management, storage, retention and destruction. Boards need to set out a clearly defined document retention and destruction policy that complies with various legislation. This needs to be agreed by the board and communicated to the rest of the company. There is no clear legislation stipulating the statutory retention periods for documents and business leaders need answers to allay growing concerns over what information to delete and what to retain. With the proliferation of e-mail, the problem of document management and retention has grown rapidly in recent years. Mr Fankham said: 'Internal policies that govern the management of documents in most organisations tend to be based on the British Standards Institute regulations and the Data Protection Act. However these guidelines and policies do not guarantee legal admissibility and without the correct enforcement , businesses are vulnerable from potentially damaging contravention of the legalities surrounding document management in particular electronic documents.' Source: "Document retention strategies need attention", finance-now.co.uk 13th September 2002

axiom-e comment: Documents need to be retained for anything from one to 40 years. Six years is normal for documents associated with accounting or taxation. Electronic documents can cause a number of issues and appropriate advice must be taken. Guidance on document retention can be provided by axiom-e.

UK fraud soars in first half of year

The UK has seen massive increase in the amount of fraud over the last six months, blamed primarily on the tough economic situation. From January to 30 June fraud cases heard by the courts rose by 150% compared to the same period last year, totalling £255m, a survey by KPMG found. KPMG fraud investigations partner David Alexander said prosecutions were likely to rise over the next two years, as more scams became apparent following the economic downturn Source: "UK fraud soars in first half of year",AccountancyAge.com 29th July 2002

axiom-e comment: Although fraud can be difficult to detect, the establishment of appropriate systems of checks and controls can help to reduce the potential for it. A regular can highlight areas of potential weakness and, importantly, make staff contemplating fraud think about the possibility of being found-out.

Technologists and management

Too many Cambridge businesses lack basic common sense....They are driven by technology rather than the need to create a rounded business.... Being an entrepreneur is more difficult than people think, and many in Cambridge are too sure of themselves. They think management is easy, that it's not rocket science, that anybody can do it and that it's the technology that's special and difficult. But technology and innovation is 10-a-penny here, whereas good management in Cambridge is not. Source: Walter Herriot, Managing Director of the St John's Innovation Centre, Cambridge quoted in "Cambridge expansion", Cambridge Evening News 19th July 2002

axiom-e comment: Good businesses use the complementary skills of their various staff. Synergies result when all are focused on the same vision/plan and trust/confidence exists between staff and the Directors/Management Team. axiom-e provides the financial management input through that SMEs, in particular, require although not necessarily on a full-time basis. Importantly, as part of this support, axiom-e works with companies to ensure that their are effective.

Learn the basics of financial management

Poor financial management is costing Britain's small businesses £1.5 billion a year, thanks to a lack of basic financial know-how. This is the conclusion of a recent survey into the financial practises of small businesses. The survey of 677 businesses by Critical Research found that three-quarters of them have experienced "significant financial problems" in the last year. These include late payments, tax return errors, payroll mistakes and unexpected overdrafts. Income and corporation tax are proving the biggest headache for SMEs. Another issue revealed by the research is that nearly half of all small businesses set their prices without having sufficient knowledge of the costs involved in producing the goods or services. There is also a lack of use of specialist bookkeeping software, a forecast demand for more advice from accountants and, in some industries, a poor payment cycle. Clive Lewis of the Institute of Chartered Accountants in England & Wales believes the fundamental problem stems from small business owners and managers being unfamiliar with the "language of finance." This is then compounded when they get involved in the more complex aspects of specific areas of accountancy. In addition to learning more about the "jargon of business," Lewis says that "developing an understanding" with your accountant can improve your understanding of finance. Rather than only speaking with your accountant once a year when your accounts are being done, he advises keeping in regular contact, thus reducing the distance between yourself and your finances. Source: Extracted from "Learn the basics of financial management", www.smallbusiness.co.uk 1st July 2002

axiom-e comment: We provide financial management to help SMEs understand the implications of their decisions and to provide information to help enhance business performance.

We also run training courses on various elements of strategic financial management and can provide an in-house courses customised for your business.

The problems of being a Player-Manager

...if being a player manager is so hard, it is bad news for Cambridge. "This is the heartland of player-manager country," Philip Augar says. "Cambridge is full of emerging companies that don't want to spend money on management overhead." We are back to the old "Cambridge disease", tekkies trying to do it all. Source: Review of The Rise of the Player Manager: How Professionals Manage While They Work by Philip Augar and Joy Palmer in "Heffers launch tonight for best-selling author", Cambridge Evening News Business News 25th June 2002

Universities 'need more business know-how'

The UK is one of the best places to set up biotechnology companies but British scientists will not reap the full rewards unless universities gain more business savvy, according to the head of one of the world's biggest specialist venture capital funds. Stephen Bunting, managing director of Abingworth Management, said changes to tax rules, a rich seam of untapped technology and increasingly entrepreneurial academics had combined to make the UK one of the best homes for new biotechnology companies. British scientists were not yet as clued-up on business as were their US counterparts and that meant investors had to take a more active role in setting up spin-outs. Source: David Firn "Universities 'need more business know-how'", Financial Times 23rd June 2002

Focus on business fundamentals

"Business fundamentals are the order of the day now, both in Silicon Fen and Silicon Valley. Sound , products that people are willing to buy at a price that yields a profit and, above all, a management team capable of delivering." "Those companies that use advisors (both financial and legal) that are seen as credible by investors often find it easier to get funding. Companies that have quality management must have complementary advisors." Source: Mark Matthewman, Partner with KPMG "Lessons learned from dotcom crash", Business Weekly 13th June 2002

The Turnround specialist's view

"Companies may have awesome technology but a complete lack of commercial nous...They need a bit of hard-nosed financial reality." Source: Andrew Jones, Chief Executive of Antiva quoted in "3D graphics firm may be rescued by trade sale", Cambridge Evening News 17th May 2002

Accounting for Growth: Strategic Financial Management in the New Small Firm

The paper investigates financial management directed towards funding growth in the new small firm in Scotland.... It is shown that those owner-managers who start with a superior business idea and express that idea clearly and efficiently are also those who will attract more external funding, and subsequently perform better. In addition, they tend to have more sophisticated methods of managing finances and accounting information, using forecast figures rather than historical data, and working from sales and profit margins rather than merely cash flow. Source: Abstract of Julia A Smith "Accounting for Growth: Strategic Financial Management in the New Small Firm", CRIEFF Discussion Paper Number 9716, University of St Andrews