The Tesco Scandal: Why It's Important to Know Your Accounting Firm
If your bookkeeping resulted in errors in your accounting records of $326 million USD, it would be a pretty serious problem, right? When Tesco's commercial finance team did so back in 2014, the scandal was huge. As a British multinational retailer, somewhat similar to America's Wal-Mart chain stores, this was a huge setback. It's also a good example of why it's important to know your accounting firm.
In 2014, some serious issues were found in one of Tesco's finance divisions. Profits were being reported significantly in excess of what was actually coming in, to the eventual tune of $326 million USD. When significant cuts to the company's dividends were reported, the UK's Serious Fraud Office became involved, auditing the company and discovering the significant discrepancies.
Though Tesco's commercial finance team was an internal organization, imagine if it were a large accounting firm. You know your company is doing well and according to the financial reports you're receiving back, you're in a good position to expand your company. The numbers seem too good to be true, so you call the accounting firm. You're told about procedures and policies that are in place and that the accounting records are accurate by people who have never even looked at your accounting records.
You take the information to the bank and apply for a loan, which is approved. A few months later, you realize something isn't right. Your business is just barely staying above water when the accounting records have said you were in great shape. An error is spotted in the records and you realize you're in a lot more trouble than you thought.
When you work with a small accounting firm, you can quickly get an accurate answer by someone who knows your accounts and your business. You can stay on top of issues with your accounts before they become a scandal such as what Tesco is currently dealing with in court. At AccountRely, we've intentionally kept our company small and our business ties strong by forming a personal relationship with every client. If you need help with getting your accounting records in order or finding the right professional to handle the job, please feel free to contact us today to get started.