09 August 2014

What is a consultant?

It's amazing how many businesspeople do not contemplate the implications of this question. There have been too many times where I have heard some managers say, "If you don't want to be on payroll, why don't you work as a consultant?"

This is wrong on so many levels, as it concentrates on form rather than substance, and it sees the matter as a tax question rather than one of justifiable necessity for the business. We must understand the different types of workplace relationships that exist, and the differences that exist between them:
  • employee (whether full- or part-time),
  • officer,
  • director,
  • agent,
  • partner,
  • independent contractor, and
  • consultant.
Beginning at the end of the list, probably the best definition of what a consultant does can be found in this model clause I've come across. It's from the US, and the wording could be tightened up, but it does convey the general idea:
 It is understood that the purpose of the Consulting is to provide periodic review and advice relevant to certain Company matters, and that neither Consultant nor Company will benefit if Consultant provides inaccurate advice or commentary based on insufficient information. To that end, Company shall provide Consultant, in advance of meetings, with accurate, unbiased and sufficient information for him to review the subject matter thereof, and shall promptly provide further information that Consultant reasonably deems relevant to forming any pertinent conclusions relevant to the matter for discussion. It is expressly understood that Consultant has no fiduciary obligation to Company, but instead a contractual one described by the terms of this Agreement; that Consultant’s role is to provide independent advice uninfluenced by commercial concerns; and that service as a Consultant does not require him to be an advocate for Company or its products in any forum, public or private. Company expressly agrees that under no circumstances will this role be compromised or inaccurately represented.
 In short, a consultant is called upon:
  • to review and advise on specified issues,
  • to expect complete cooperation from the client in obtaining the information needed to accomplish the task,
  • to be independent in his approach, and
  • not to be an advocate for the client.
Notice as well that this type of relationship means that he is not:
  • an employee, as his output is not subject to the client's control.
  • an officer or director, as he does not have the capacity to make decisions that directly affect the client.
  • an agent, as he does not have the capacity to bind the client.
  • a partner, as he does not have the ability to share in any gains or losses from the client's activities.
  • an independent contractor charged with the responsibility to provide a specific deliverable beyond his reports.
Our CMA training provided us with the capacity to assess strategic issues within a broad context, which directly ties in to this area. Our professional training has also included business management experience, so we can also step into more active roles, should our subsequent client engagements call for such moves. I am ready to help provide success in all such aspects.


06 August 2014

We're all in this together now...



After so many decades, the way is clear for Canada's three accounting bodies to merge into one! As usual, Ontario was the last to agree (there's a lot of history behind that, as I have alluded to in previous posts). The various provincial legislatures will be passing the appropriate legislation this fall, once they return after Thanksgiving this October. Quebec, New Brunswick, Saskatchewan and Bermuda have already done so, and British Columbia has taken the interim step of recognizing the new designation (with amalgamation of the bodies to follow). Ontario took a unique route, as I described previously.

The various squabbles that have divided us for so long remind me of what has been said about university academic politics, which are so vicious because the stakes are so small! When pressed to describe what has made each of us so distinct, most of us have had a hard time putting it into words that would be helpful to someone outside the profession. I think the best description was found in a bad joke from the 1980s:
"CGAs do great books, CMAs tell you the truth about what happened, and CAs bend it all to fit generally accepted accounting principles."
That, of course, was said in jest, but it does describe the three basic approaches that figure in accounting education: financial statement preparation, operational analysis and external reporting. All else flows from these three core components.

We still have a lot to do to educate others as to what we are truly capable of. Job descriptions that call for a professional designation with knowledge of QuickBooks (as I have seen on numerous occasions) are definitely off the mark. QuickBooks, as well as Simply Accounting, can be performed by someone with a high school course in bookkeeping, while someone with a professional designation would be called upon to review the work. However, the ability to review is subject to any public accounting licensing restrictions that may be in effect in that jurisdiction.

In a similar vein, I have also seen job positions that call for a degree and designation in order to hold a Financial Analyst role. FA positions are a great training ground while you are studying for your designation, but a severe underuse of capabilities upon graduation.

Quite frankly, those with professional designations have been trained to hold management positions within the organization. Private companies whose owners ignore that fact will be severely constraining their capabilities. Public companies are more aware, but the smaller ones still need to be given the message.

Let's see what the future holds. Bring it on.