Accounting - When danger looms large.

(From Financial Director)

Byline: Peter Williams.

Basic accounting and bookkeeping is too often treated with contempt by company directors who should take their stewardship duties more seriously.

You don't have to be an expert on company law to know that the Companies Act places a duty on the directors of a UK company to maintain proper accounts that disclose the financial position of the business with reasonable accuracy. It's a duty that too many directors regularly ignore.

The latest quoted company to have mucked up its accounting records is the SFI Group, which operates a number of pubs and restaurants throughout the UK, including Slug & Lettuce and Litten Tree chains.

The Financial Services Authority's damning report on SFI accounts, accounting procedures and financial controls is a frightening expose of a company that, at one point, had turnover of GBP115m a year and net assets of GBP84.3m. In other words, it was a big company - and big companies need commensurately large and robust accounting systems.

SFI's tale of cock-up is compelling because it contains a series of warning signs that should have alerted directors and senior management to the looming disaster long before the bank syndicate was told the company was "experiencing increased creditor pressure".