With the worldwide economy slowing down, gas/petrol prices at a common high, and unemployment keeping up with the pace of inflation, businesses are starting to feel the handicap of the consumer’s weakened ability to spend. With slumping sales and shying margins, businesses are starting to scale back on what now seems like careless expenditure, which before seemed like tax savings. Amusing how a swing in the global economy can put a different spin on the temperament of spending by execs on unbelievable items in big business, but then corporate world is full of, well, moronic activity.

With these trends in the economy and businesses, companies are pressuing Finance and Accounting Departments bring about more useful, effectual, and balanced numbers, that not only aid the company look healthy to independent parties, but keeps motivation up for the workforce and other direct stakeholders. Pressure mounting on Corporate Finance means that accountants presently have to make more more of an effort to make sure the numbers are truthful and look like what management wants to see. That, is where it all becomes hairy.

With pressure mounting in Accounting Departments in Corporations across the United States and Europe, Corporate Finance Departments are increasingly using fancy accounting measures to try and make the situation look positive. Controllers and Finance Managers across the planet want to see low DSOs and high DPOs; the trend to track cash flow and cash efficiencies becomes commonplace; income recognition guidelines cross over into the gray area, and the hiring and spending on items that were once treated as as an expense are now looked at from the perspective of investments and assets. Such is the nature of finance execs: it is driven and managed to please the boards, CEOs, CFOs, stockholders and investors.

But possibly the top affect of Corporate Finance is one that is hardly ever discussed or talked about. In times of slowing global economies, the position of many accountans and finance managers in large corporation becomes a political one, and many will, and have to, for the sake of protecting their careers, venture over a gray area, where reports and numbers are presented that show NOT what the business is achieving, but showing what administration wants to see the business accomplishing. In effect, this means that numbers are either fudged or presented inaccurately completely for the sake of safekeeping jobs or moving up the ladder. Let’s be honest: about 80% of all people in the Corporate World go up the ladder not because they know what the hell they’re doing, but because they try and please the chief, whether it’s for the better or the worse of the business itself.

That’s where the problem ultimately lies. It is in these times of decline that Coporate Finance can specifically point out the areas where the business can improve, where adequacy is not acceptable, where improvement is possible, and what things need to be like to maintaining increasing margins and flourishing sales. But instead of using the intelligence of accounting and finance, many businesses kill this one chance of harnessing the power of Corporate Finance, and kill it with their need to look good in front of a Board of Directors or Shareholders, which eventually kills the business. For this, amongst other things, it is imperative that Corporate Finance and Accounting Departments across Corporations stay focused and produce reports that accurately measure the position of their businesses, so they actually have a chance of riding out the recession, rather than looking to gain an improvement in a business that will shut down in the next five years.

Of course, Financial Planning and Analysis is not an area that many accountants excel in, which is why many may make the mistake of not looking past the next five years.

Proof of Funds