It started so well: FD let me on a secret, which could have the markets rocking. Blaminio plc is moving into a new business with the acquisition of a fast-growing and apparently successful chain of... Actually, too much detail might kill the deal, and with it my not-insubstantial bonus.
This was no surge of comradeship by FD, mind you. He needed our group strategic financial analyst (er, me, apparently) to make sure all was well with the acquisition target's financial systems ahead of the deal. It didn't take a genius to work out "why me?" The target company (code-name "Turkey" – the FD thinks this is a seasonal joke that the City boys will like; as you'll see, it's more appropriate in the theatrical sense) relied heavily on spreadsheets to drive its accounts. The interesting part? I also had to talk to the key finance personnel to find out how "the fundamental re-engineering of the entire enterprise resource planning system could be used to drive added value in the finance function through the whole organisation for enhanced, sustainable shareholder benefit". Look, I didn't write it, OK?
So, I pitched up at Turkey's smart HQ to start unpicking their spreadhseets. We arrived to the news that the financial controller was on long term sick. Or paternity. Or, er, maternity – the story changed more often than my socks, and even the sex of this FC was unclear (my money was on compassionate leave to allow for gender re-assignment surgery, which would explain the confusion). Either way, "they" had left behind a detailed management information pack.
I've never seen a report that was more reverently prepared each month, handed to the board with great solemnity... and then promptly ignored. And who could blame them? No-one could wade through all those pages. The pack had a P&L for each of Turkey's many outlets with product income streams set out against forecast, budget, last year, same period last century... There was enough variance analysis to satisfy the weirdest accounting fetishist. Imagine an M&S non-exec being told how many white, cotton, size ten ladies knickers were sold on a Monday afternoon in the Shrewsbury store and you'd get the idea. (On second thoughts, I can't vouch for M&S non-execs; who am I to say what turns them on...)
The irony was that after all these pages of P&L stuff, there was only one page which came close to a balance sheet – and no cash flow data!
We attempted to reconcile this Amazonian rain forest of useless spreadsheets to the shiny expensive accounting/ERP system that sat largely ignored in the corner – even though it was meant to produce the statutories. Now I have little time for these over-valued tin boxes. Hell, if anyone ever realises you can generate flash reports from the actuals without squirting the data into Excel, I'm in trouble. But even I know they need to be treated with a degree of respect, if only for the audit.
Taking a month at random, I tried to do the equivalent of checking the Shrewsbury size ten sales. It didn't work. Nor did many of the other items I tried from different locations and time periods. FD and I were equally horrified to find the accounting periods were never closed in the general ledger – so adjustments (stocks, sales returns and who knows what) could be made at any time. The result was that cumulative sales bore no relation to the spreadsheet numbers that the board assumed were "real" figures. No one could say which system – ERP or spreadsheets – was more accurate. At this point, ED ordered us to beat a hasty retreat to consider our position.
The irony? As far as I know, the acquisition is still on. That's CEOs for
you: do the deal whatever finance says. But even my desire for a bonus-laden
Christmas pales at the thought of having to stuff this turkey well into New
Year. See you in 2006.