Exploring accounting for better business with EMBA Anna Kij

Craig: Hi, I’m Craig Knightley and welcome to today’s episode of EMBA in a Day.

Today, we will hear from Anna Kij about the accounting module.

Anna: To be an effective leader, you need to know your numbers.

Craig: Anna is an impressive individual and is far from the typical finance director.

Anna: To help the business drive their growth, through the numbers that you’re producing and giving to the businesses is something that I personally really enjoy.

Craig: She’s highly personable and is very knowledgeable on accounting, that she ended up teaching many of our cohort the accounting module online on Saturday mornings.

Anna: Doing an EMBA is quite time-consuming. Having a baby is very time-consuming. Juggling both is impossible to some people.

Craig: I’ve witnessed you in lectures in and around the Business School. You’ve made it look easy. I don’t know  how you make it look easy.

Anna recently became the finance director at Colliers, which is a real estate management company. As part of this promotion, she moved to London from Sydney.

Anna: The hard thing about being the head of a technical department, is you’re going to deal with many stakeholders in the business. Gathering the context from these people to truly understand what it is they’re trying to ask and what they’re going to do with that number is important.

Craig: We’re at Cambridge Judge Business School today, which is where we come for our lectures each month.

Craig: I’m really pleased to have Anna here with us today. For our first question, can you tell us a little bit about your background? You’ve had a really interesting career to date.

Anna: I’m Anna, a couple of things about me. I like travelling and food. I also love numbers. I think I’ve always had an affinity and strength towards numbers, from when I was young. This led me to a business degree in Sydney, Australia. I did that for a couple of years. Then I moved into a commercial role with Deloitte for a number of years, doing internal auditing there.

I’ve had some various finance roles in the last 10 years. I’ve worked in property companies like Stockland and now currently in Colliers as a Finance Director. That’s a very short snippet of my career to date.

Craig: Has there been a plan career wise or has it just been a sort of natural journey?

Anna: I think for people that are in accounting, we’re quite lucky in that there is a clear trajectory, to be honest. You can kind of see the steps that you need to make towards getting to something like a CFO (Chief Financial Officer) at some point.

Craig: What part of the role are you most passionate about? What gets you out of bed in the morning? You talked about having a love of numbers. As someone that’s also liked math at school, I kind of have that same affinity. What’s the bit that you enjoy most about your role?

Anna: I enjoy seeing what I give to somebody like my CEO. I enjoy seeing what I give to him and how he uses it for what he needs. I like to help the business drive their growth through the numbers that you’re producing and giving to the business leaders is something that I personally really enjoy.

Craig: How do you bring the numbers to life for people? Is that something that you see as a core part of your role?

Anna: That’s a really good question. I think to be an effective leader, you need to know your numbers. How my function comes about as a finance leader, is to be like a business partner with a CEO, trying to drive their business, and I need to put myself in their position as well.

Craig: You’re based in London now, right? Coming up to Cambridge once a month? You’re not originally from London or the UK, so when did you choose to move across from Australia? What drove that decision and was that something you always thought you would do?

Anna: I moved during COVID-19, which was enormously bad timing. It was March 2020, I had already decided to move to London in November 2019. I packed all my stuff, I had sold a couple of my properties, and I was ready to go. By the time it was March 2020, COVID-19 happened. I had already bought a ticket to London, so I thought, you know what, I’m just going to do it and see what happens.

We landed and that was the weekend that London locked down. I had no apartment to rent, I had no groceries, nothing. It didn’t go to plan. In hindsight, it was one of the best decisions that I have made. I felt that I needed to see what there was to offer on the other side and to explore that.

Craig: And obviously then in 2022, we started on the EMBA together.

Anna: Yes.

Craig: Why did you choose to then put yourself again out there and do something new again? What was the thought behind that?

Anna: I guess, again, back to my personality, I needed to try something new. To be honest, I think doing a business degree, the EMBA was always on the horizon at some point in my life. It was rather than the question of should I do it, but more when I was going to do it. At that point in time, I though, maybe I should do it before I have kids, before I family plan, before things get a little bit too busy and I can’t study.

Craig: When I met you in September 2022, you were 6 or 7 months pregnant.

Anna: I was.

Craig: You’ve just moved country 2 years ago. We’ve just come out of lockdown. You’re doing the EMBA.

Anna: Yeah.

Craig: And you’re 2 or 3 months before you gave birth to a daughter in December 2022. Talk to me about how you felt it. I mean, you’re laughing a lot, so obviously you’ve either gone crazy or everything is fine. Tell me about how you’ve juggled all that. Having had 2 kids, I know how hard it is to juggle all that stuff at home and stuff at work.

Anna: I didn’t plan for her to come so early. I had to sit down with my husband when it happened and really talk about what this meant for us. Doing an EMBA is quite time-consuming, having a baby is very time-consuming, juggling both is impossible to some people.

I think, overall, the experience was a good one. What was quite challenging was the scheduling. Before I would have very rigid hours of what I would put into studying, and then how I had to work. You’ve got your blocked hours of discipline, and then when you have a child, it just completely flips upside down.

At some point, it got better. She started getting more used to the world as a baby. I started getting better as a mum and being able to juggle it. It does get to a point where you start getting good at being able to go with the flow with her and then study when you can.

Craig: Obviously, having witnessed you in lectures in around the Business School, you’ve made it look easy. I don’t know how you make it look easy, but you made it look easy. I would make it look very, very hard. I will make most things look hard.

Craig: It’s amazing to have you here to talk about the accounting module. Your background as a finance director, and having grown up as an auditor, and having gone through that sort of career path, that journey, you are as well placed as anyone on the course to talk about this.

I have said this to you in private, I don’t want to embarrass you, but you got to the point where you were teaching other people our class, right? That’s where it got to. People weren’t sure what to do. You were having sessions with people whilst being heavily pregnant and coaching other people on our course about an impending exam. Patience of a saint. It’s amazing you could do that.

Understanding accounting is essential to evaluate the financial performance of any business. The 3 main financial reports are, the balance sheet. What does the business own and owe at any one point in time? The profit and loss account, often called the P&L. This is how much profit a business is making during a defined period of time, typically a quarter or a year. Lastly, the cash flow statement. How much cash is being generated through the operating, investing, and financing activities of the business?

The module also explains how to use these financial reports to analyse the health of the business. These ratios can largely be put into one of 3 buckets. Bucket one, profitability ratios. How much profit is a company making relative to its size? Bucket 2, operating efficiency ratios. How quickly and efficiently can the company sell products? Bucket 3, solvency ratios. Has the company got enough cash to keep going for the foreseeable future?

The comparison of these ratios to the company’s peers can show where performance can be improved and is an important part of how any management team evaluates how the company is doing.

Crazy idea, we start a business together. I’ve said to you before, how I would start a business as a chip shop, which is close to my heart, having been employed for 3 years from age 15 to 18 in a chip shop. Can you walk me through each of those financial statements as if it were our business in a simple business model?

Anna: I would love to open up a chip shop with you. It sounds really exciting.

Craig: It’s not. It is really hard work. Insurance is a lot easier.

Anna: For this example, let’s just say we go to a bank. We borrow some money. That is already the first line in your balance sheet. We’ve got a debt and that fits underneath the liabilities in your balance sheet. That’s the first step.

Craig: The balance sheet essentially is saying a record of what do we own or owe. Is that a fair description?

Anna: Yeah, that is a fair description.

Craig: We owe the bank, let’s say, £100,000.

Anna: Yep.

Craig: HSBC, or whoever. We would have a debt of £100,000.

Anna: That’s right. Yeah.

Craig: The cash flow statement would be watching how the cash moves around the business, almost physically. I know it’s not as simple as that.

Anna: Yeah, the simple explanation of why that exists and why you should care about it.

Craig: The profit and loss would be, I’m making sales in my chip shop and I have to take costs off. At the end, I either have a profit or a loss. Am I spending money on the chips and the fish? Am I getting lots of sales? At the end, if I have more sales than I have spent, in simplistic terms, I should be good, right? I’ve got a profit. If I haven’t, I have got a loss.

Anna: Yeah.

Craig: Then the balance sheet is the way of assessing the amount of wealth I have got. The things that I own and cash that I have, and there’s people that I would owe money to. If I’ve got more cash or assets, physical things, then I would be worth something, and in the balance sheet would show that I’ve then got equity.

Anna: Yeah.

Craig: I’m doing well. I am ready to open that chip shop. I have just got to convince my children to go and work in it for a very low wage. If we wanted to assess how well our chip shop was doing versus the chip shop that’s in the village next door, how would we do that?

Anna: This is where ratios will come into to play here. There are many ratios. They’re not applicable to every single business. I think the first question is you need to understand is what the key drivers are of your business? Let us use the chip shop. What is important to us, is the profitability.

We should use ratios for profitability and benchmark it against our competitor down the road. If we are doing well, then it would reflect in a profitability ratio.

Craig: The profitability ratio, as a basic level of understanding, would be what divided by what?

Anna: We would take our profit and divide it by our revenue.

Craig: If we compare that ratio to chip shop down the road. That chip shop had a ratio of 6% and we had 40%.

Anna: We would be doing very well.

Craig: Very, very well.

Anna: Very, very well.

Craig: I think the average profit margin of all businesses in the US is like 5%, isn’t it? It’s quite a low number.

Anna: It is quite a low margin business. Yeah, so we’d be doing very well compared to them.

Craig: That’s one ratio. —At its most simplest level is profit margin.

Anna: Lots of businesses use profit margin because profit is very important. Then we start looking at our operations. One question, I would ask is, back to the liquidity issue, do we have enough cash to sustain what we’re doing on a day-to-day basis? We would look at something like the liquidity current assets divided by current liabilities, and compare that to our competitor.

Craig: Part of the module, we had to do 2 things. We got one assignment, which we’ll talk about in a second. Then the exam, where we had to go in and do all the ratios from scratch for 3 hours, which was a pretty daunting experience. Can you just explain to me what we asked you in the assignment and how you approached it?

Anna: We had to compare 2 supermarkets. One was called Ahold and the other was called Tesco. They gave us a profit and loss and the balance sheet of both. They got us to compare the 2, using ratios, using year on year analysis, to compare which one we would rather invest in.

Craig: Which one would you rather own?

Anna: There were things like profitability that you’d compare and liquidity. You’d compare efficiency. At the end of it, it was good, because from a high level, you would be able to summarise everything that you can see in front of you. I know it is quite daunting with all the statements. You would be able to summarise it in a way that makes sense from a business perspective.

Craig: I am trying to remember it all now. I think we had to look at the trends. One supermarket the trend was increasing, the profit margin were going up. They were growing. It all looked good from my memory. Then there was another one where it looked a lot worse and the profit margin was more variable.

Anna: Yeah.

Craig: I think what we were asked to do is then to look at those things and form a view based on that. I’m hoping you would tell me I have done all right there.

Anna: Yeah, that is what we had to do. I think it was interesting because you could see the trend going up in one and then the trend going down in the other. If you dug a little bit deeper into why the trend was going down, they had investments. They were doing things in the back. You are then thinking, maybe I can invest in something that’s profitable today, or hedge my bets for something that might do well in 5 to 10 years time.

Craig: I think that module was so valuable for most people in the cohort. It’s great for you when you’re teaching all these people in the module. I think for me at least, the accounting module is arguably most valuable for people that haven’t done accounting before. If someone said to me, what’s my favourite part of the EMBA, I’d say arguably accounting if you haven’t done it.

Anna: I’m happy to hear that.

Craig: I know I’ve told you this analogy before, but when I started out, I qualified as an actuary. I was reasonably pleased with myself. My career got off to a good start. I’ve done these exams. It was all looking good. I started at this new company, walked in, sat down next to the finance director who was my boss.

About 3 weeks later, he took me for a coffee. I was happy, I thought I was going for a free coffee. He sat down and gave me a piece of paper. I thought, what’s happening here? This is taking a twist. He then asked me to write down the profit and loss of the company. I did not know what the numbers were.

The point he was trying to make to me was, if you do not know the numbers, you have not got context. If you have not got context, you cannot impact the business. That was the most valuable thing I ever learned because, from that point on, I then went and learned all the figures. It has always been the most important lesson, because it gives me context and knowing what I should be trying to impact and what I should not.

It’s not just a case of reciting numbers. It gives you context. It was a bit of an awkward coffee and the coffee got cold. It was a great experience. I’m grateful to him that he did that for me.

Anna: That’s really good. What it does, is it lets you prioritise where you should be putting your effort. Numbers are just numbers, but if you had a number of departments that you were looking after, and then I told you, this one department isn’t making any money. However one potentially could be, you’d automatically put a lot more investment and a lot more time and money into making that pot grow rather than putting time and effort into something that’s not worthwhile.

Craig: What did you get out of it? I can see the value for most people on the course. For someone like yourself who is an expert in this field, I’m intrigued if you found it a waste of time or if there was something you got out of it?

Anna: I definitely got something out of it. A lot of the time, I’m dealing with business stakeholders that are not finance and accounting people. For me to be able to explain what value they can draw out of me is really important. To teach you and other people the accounting module was something that I needed to learn how to do too, because you can get stuck into the jargon and all the detail and your message does not get received, and you can see people losing interest.

That was a skill that I needed to enhance. That was something that I learned whilst I was doing it.

Craig: I’m pleased, in many ways, I helped you. I am intrigued what you’ve learned about accountancy that wasn’t in the module. Is there anything that you wanted to interject and stand up and say, right, thank you, Mr and Mrs Lecturer. I’m going to give my perspective. What do you think was not covered that much?

Anna: What I’ve learned is more from experience. The hard thing about being a head of a technical department is you’re going to deal with many stakeholders in the business. They will have different incentives and different reasons as to why they’re coming to you to ask questions. You think that it’s one answer for all of them, but it really isn’t. Gathering the context from these people to truly understand what it is they’re trying to ask and what they’re going to do with that number is really important.

Craig: In essence it is important to understand the stakeholder and understand the context. If you don’t understand those 2, you could well be providing the right answer to the wrong question.

Anna: Exactly.

Craig: What is the best bit of feedback you have had relating to accountancy? Then simply, what’s the best bit of feedback or advice you have had more broadly?

Anna: The more broadly one, I will talk with that one first. From a personal perspective, the best piece of advice I have received is when you are in a boardroom or where you’re presenting or where you’re talking about your expertise. Speak it as if you know your topic because you do. It is more from a confidence perspective.

Being from a technical background, the more you dig into your field, the more you can see, and then the more you don’t know. It really plays with your confidence. When you go into settings where people are asking you questions, it almost feels like they are challenging what you are presenting. Sometimes, it can get a little bit daunting. If you improve your confidence and you take it as if you are the expert at what you do, nobody else knows what you’re presenting as much as you do.

Craig: Part of the EMBA, there are around 95 of us working together. We’ve had to do lots of assignments where you get randomly put into groups of 5 people and do these different assignments, and people wouldn’t be aware of that if they hadn’t done the EMBA. Now, you and I were put together, about 3 or 4 months ago.

We were working with a few other people on marketing. we were trying to market —something.

Anna: We had to build a marketing plan.

Craig: That’s right, a marketing plan for a handwash in Switzerland. I do no know how that has gone. Of all the people I have worked with on the EMBA, you are the person I’ve been most impressed by, because from my perspective, having worked with you on that marketing plan, you took a natural leadership role and got us working well together. I was so impressed by that. I think the team was so much more efficient and effective because you took that role on. How did you make that happen?

Anna: I do not approach leadership as if you have got a vision of exactly what you need to happen and you put everybody in line and expect things to be done in a certain way. I did not approach it like that. I think, how I wanted us to feel at the end was a certain way. I wanted everybody to feel accountable, but I also wanted to feel wanted everyone to feel like they were valued.

It is where I have always tried to get to at the end and dealt with every situation at that point. All of us are valuable. We’ve all got something to contribute. Being able to harness that value out of everybody and have them do what they are good at and then seeing what happens afterwards is how I was playing it out, honestly. I didn’t really have a plan, I just wanted to make everybody understand the end goal, contribute what they wanted to contribute, feel good about it, and then get to the end.

Craig: That’s great. I think you did what was really nice, you had people feel valued first and maybe accountable second. I would probably flip the words, how it felt the other side, maybe in your head, you make that guy accountable. It felt like I was being valued and then after it was being accountable.

I think those 2 words are brilliant. I think it did feel very much, 80% valued, 20% accountable. It felt very natural for you to take on that role, which was great, and the hand wash is going to do very well because of it.

You cannot really go anywhere without reading about AI (artificial intelligence) in newspapers or on the internet. I am intrigued, from your perspective, you will be reading and seeing a lot about AI as well. What is your perspective on how much AI might impact finance? Are you worried about that? Are you excited about it? I am intrigued what your view is.

Anna: My overall view would be that I am really excited about it. I think, there is a lot that AI could do to make my life and my team’s life easier. There is a lot of manual jobs that we need to do to have all our systems make sense. I think, AI and how I envision it would be something that we would utilise to free up some of our time to be able to do more value-added tasks and not spend hours at night doing invaluable ones.

Craig: You mean moving numbers?

Anna: Yeah, from one system to the next, I mean.

Craig: That is what our teams, I think, at our place seem to talk about a lot is trying to reconcile different systems and then putting numbers in cubes. I don’t even know what cubes are, —it is always complex. It sounds like it could simplify that?

Anna: It could absolutely simplify that.

Craig: It could a good thing.

Anna: Yeah, and that is one small example of what it could do. There is so many mundane tasks that we must do in the back to make everything work. People don’t really thank you for it either. If AI could help with that, I would be really pleased and excited about it.

Craig: I am really grateful for you, doing this with us today and sharing all your insights. Accounting has been such great time to spend with you, really appreciate it. I am really excited about our chip shop and how it’s going to do in the future. Thank you for your time, and it has been great.

Anna: Thanks so much.

Craig: Thank you.

Craig: You have heard Anna describe, the financial statements are the bedrock of any business. Knowing the numbers well is so important to understand how the business is doing. Having a working knowledge of the P&L, the profit and loss account gives you context for where to focus your time and energy. You can use it to figure out where you can help the company make more money.

Craig: When assessing the financial statements, it’s worthwhile comparing them to those of peers in the same industry and to also consider wider business context. We hope you found today’s episode useful. Stay tuned for episode 3 when we’ll be discussing the consulting module with Darshanie Mahadeva. Thank you for watching today.