Getting on board: why organisations need good governance

Time to read: 6 mins

The amount of compliance and expertise involved in maintaining and managing a business has changed significantly over the past 20 years. Changes to the Privacy Act and Holidays Act, environmental obligations and the rise of e-commerce are just a few of the things today’s business leaders navigate, yet many New Zealand businesses don’t have a board or external advisors. It often takes a trip-up in some aspect of governance to seek external help.

Not only are many businesses exposed to greater risk that could be avoided through the right advice at the right time, they aren’t making the most of opportunities created by evolution of the operating environment. Veteran board director and economist Brent Wheeler says two-thirds of New Zealand businesses simply wind up once their founder retires, with no succession plan for the future, meaning decades’ worth of experience and relationships are lost. To really grow New Zealand’s businesses – and our economy – that has to change.

The good news is that it’s not hard to get that extra layer of governance in place, so business owners aren’t left to manage the job all by themselves. Most businesses already have an accountant. Calling on the experience of your accounting firm, whose members already know how to navigate regulatory and compliance issues, manage cashflow and create a solid business structure, makes sense when establishing a board. As many businesses and NGOs have found, it can also ensure small issues don’t become big problems.

Working on your business rather than in it

The role of a board is effectively to assess major decisions, strategy and the financial health of a business to ensure it remains as strong as possible, while being accountable to its stakeholders.

A good accountant is also key to the financial health and success of most businesses. It’s their job to help make the numbers work by ensuring your present, past and future business activities are compliant, and advise you how to reduce tax and maximise cashflow.

But the profession has evolved from simply crunching numbers. Through exposure to many different businesses and deeper relationships in specialist sectors, accountants are plugged in to broader trends and have knowledge of what other businesses have done to overcome common challenges. That equips them to deliver strategic and pragmatic business advice to their clients while remaining on top of the latest regulatory changes. That’s why having an accountant on your board as an external advisor can come in handy.

While it’s best practice to employ different individuals to act as your accountant and your board advisor to avoid conflicts of interest, having an accounting professional sit in on board meetings is a great way of assessing financial risk and opportunities and even HR decisions. It can be incredibly helpful having a neutral third party objectively assess how your business is performing, where you’re falling short and how you can improve.

Fiona Welten, Director at Baker Tilly Staples Rodway Tauranga, has served as an advisor to several boards, including agricultural fertiliser company Fertco.

“The feedback I get is that it removes the 'what would the accountant say?' question, because they have someone on hand who can provide instant feedback. That saves a lot of time and speeds up the decision-making process considerably.”

Fertco chair Brent Wheeler agrees.

“Regardless of size, all businesses need governance to function. And more importantly, grow. However, it does require time investment to work on your business and not just in it. That’s why you’re seeing more SMBs adopt board frameworks. Two of our directors are farmers, but when it comes to things like understanding markets across different sectors, how businesses are coping with COVID-19, recruitment issues and opportunities, Fiona is the one with the broad knowledge.

“She also keeps us accountable by interrogating financial reports and issues like bad debts, making sure our processes are as robust as they can be to keep cash flowing. When you have people like that whose role is solely to work on your business, they can also focus on creating more opportunities for your employees through training, structural changes and succession planning, which can often become an issue in agricultural circles especially.”

Brent believes that while many business owners consult friends or family on business decisions, having external advice from specialists who have insights into dozens of businesses, across multiple industries, is what really gives them the edge.

“Many SMEs haven’t seen the value of having a board, but that’s changing as organisations realise they need people who can bring skills that they don’t have in-house, from accountants to lawyers, IT and marketing experts. They provide a more rounded perspective without being embedded and emotionally invested in the day-to-day running of the business, internal or even family politics,” he says.

Balancing entrepreneurialism with discipline

If your business struggles to find time to focus on governance, you’re not alone. When you’re busy, it can be hard to think about anything non-operational, and it can seem like another added cost. However, Mark Kingsford, a Director at Baker Tilly Staples Rodway Auckland, says even a quarterly catch-up is enough to add value at very little expense.

“Many organisations – especially NGOs – get bigger and bigger without moving forward or increasing profitability. As you get bigger, it’s harder to keep your finger on the pulse, so where we can help is setting up the internal infrastructure to get the right information to the people who make the decisions,” he says. “People are afraid advisors will come in and tell them how to run their business, but it’s more about adding discipline and accountability. Sometimes my role is simply to ensure an organisation or owner does what they said they were going to do.”

Mark serves on the board of Sea Cleaners, an NGO that co-ordinates clean-ups of Auckland and Northland waterways by volunteers, as well as environmental education. Beginning nearly 20 years ago with a vision to preserve New Zealand’s coastlines, it has grown to a fleet of four ships supported by major sponsors like Coca-Cola and Ecostore.

“Since we started back in 2002, we’ve aimed to be a professional, above-board entity with good governance,” says Hayden Smith, Captain and Founder of Sea Cleaners. “For us, the small cost of having advisors like Mark on hand to balance out the entrepreneurial side of things is essential. Things like taking minutes, examining risks, advising on business and financial models all bring a sense of discipline and accountability to our actions, enabling us to focus on our core mission and the sustainable growth of our organisation.”

For more information on how to set up a good governance structure, contact Fiona Welten Fiona.Welten@bakertilly.nz or Mark Kingsford  Mark.Kingsford@bakertilly.nz

DISCLAIMER: No liability is assumed by Baker Tilly Staples Rodway for any losses suffered by any person relying directly or indirectly upon any article within this website. It is recommended that you consult your advisor before acting on this information.

Sign up to our newsletter

Thanks for signing up!