Stafford's Accountant Blog

As a good citizen I have been looking up about the Alternative Vote in readiness for 5^th May. But what has the AV referendum got to do with business?

The answer is three-fold:

• Things are rarely as simple as they seem
• The devil is in the detail
• Some things are counter-intuitive

Have a look in Wikipedia under “Alternative Vote” and you will see what I mean. It’s more interesting than it sounds. There is a large amount of statistical theory underlying AV which most of us can only marvel at.  It is a lot more complicated as votes may have to be counted several times and the ballot papers are more complicated. It is also possible to cause a candidate to lose by ranking them higher whereas they might have won if ranked lower. Those who are expert in monotonicity theory will not be surprised at this. The rest of us will be.

Applying this to the business world:

Simplicity

The obvious example here is a business acquisition, sale, merger or flotation. It is not just a matter of saying “I will buy your business for £x – do we have a deal?” Months of disruptive stress, frustration and tedium lie in store. For those who have not been down this road before, the pitfalls are many. One of the most frustrating things about deals like this is that the parties rarely communicate in an open and clear way. Awkward truths are hidden so as not to prejudice the deal. Desires are concealed until the drafting stage. People change their minds and have different or unrealistic expectations. Entrenched positions are taken and the testosterone injections kick in with a vengeance. And that’s all before the lawyers get on the case.

Detail

How many of us have ever been conned into a photocopier leasing contract which we have subsequently regretted? How many of us blithely click “I have read the terms and conditions” on websites when making purchases?  How many of us have taken on a “rogue” employee and found it an expensive process to get rid of them? Yes – me too. We are contractually bound by what we sign up to. A signature in haste may prove costly.

Would you believe it?

My favourite example of counter-intuitiveness is the phenomenon that in a class of 23 there is a 50% chance that two children will share a birthday.  In contract law, if you sign up to a commercial lease, you can remain residually liable years after you have moved out. You have virtually no control over the service charge.  Any improvements you make may increase your rent at the next  review. Finally, if the landlord decides the roof needs replacing a day before your lease ends, you may have to pay for it. I could go on. Similar examples arise with employment, banking, purchasing and taxation.

In this topsy-turvy world where nothing is quite as it seems, vigilance and attention to detail are more vital than ever before. Paradoxically this is happening at a time when technology forces us to take more and more things on trust. Regulatory and compliance matters are more onerous than ever before but ignorance of the law is no excuse. Well actually it sometimes is. Try turning it round to “You are deemed to know every piece of primary and secondary legislation in the land, including all associated regulations and applicable best practice.”

The moral of the AV story is that someone (not necessarily you) needs to check out all the boring but important stuff. Employ a good admin person, use your advisers sensibly and get on with running your business.

Finally, those who read my article on Franchising last year may be interested to know I have just received an email exhorting me to sign up for an oven-cleaning franchise. Need I say more?

Julian Stafford is a partner in Staffords Cambridge LLP, a leading independent Chartered Accounting company, and specialises in advising new and developing SMEs.

For more: 01223 881444 / www.staffordsllp.com