Groceries misconduct – Finance Director Europe LinkedIn discussion

26 November 2014

Recently, Tesco overestimated its profit forecasts by £250 million and the UK’s serious fraud office (SFO) is currently investigating. A recent Finance Director Europe LinkedIn discussion, initiated by Alan Bagnall, UK sales director at Adra Match, tackled the issue.

Question: What, if anything, can we learn from the Tesco scandal? With more bad news coming out of Tesco (a larger profit hole than expected and the resignation of their chairman), are there any lessons to be learned from its mistakes? What can finance departments learn from Tesco's £250-million financial black hole and the importance of the right governance, risk and compliance controls?

Alan Bagnall, UK sales director at Adra Match

More scandals are likely to come to light because common-sense financial controls are steadily going out the window in all business sectors. Many execs believe, and I have met several, that expensive ERP software will enable them to cut finance headcount and keep their books straight at the same time. Wrong.

If automation software is going to help keep the books straight, then it had better be good at reasoning and making decisions like an experienced finance professional. That said, it is true that matching debits and credits is a boring and time-consuming manual task that, if automated to some degree, could remove some of the drudge work that finance teams often neglect.

Those who neglect standard financial controls are taking enormous risks at the shareholders' expense. SOX was implemented in the US to try and ensure that no such risks could be taken. - Philip Rooms, interim CFO and VP Europe at ResolvNow Corporation

No organisation can afford to have high volumes of undocumented processes and manual activities go unautomated. In fact, the repetitive nature of reporting on financial figures makes it an ideal activity to automate. Financial close automation improves data integrity, close consistency and eliminates risk.

Every financial process is at its best when all repeatable steps happen with absolute precision every time they're executed - automation guarantees this.

With complete automation, the creation of a dynamic audit trail becomes part of the process - there is no additional tool kit required. With automated execution, documentation and notification of process steps, processes continue without any unnecessary latency or confusion. When the actual processes document themselves, management gets a complete picture of what's actually happening in real time, all the time. - Dennis van Voskuijlen, group financial controller at Redwood Software

I had a six-month interim role at Tesco's head office last year. There were lots of able, highly motivated people there who displayed great integrity as well. It's a shame that they'll suffer because a few individuals couldn't resist the temptation to manipulate figures. - Helen Blenkinsop, interim tax director at Skycap International

I can readily empathise. I trained at Arthur Andersen's in the UK Midlands office. I still get the jokes about sitting by the shredder, when the brutal truth is that a lot of really great people got their lives and reputations destroyed by the actions of guys in a different continent. All it leaves me with is sadness and an appreciation for reputational damage caused by a few misguided individuals. The only upside is regulatory strengthening that inevitably follow such events. - Alan Bagnall, UK sales director at Adra Match