Accounting and HR

In the July 2009 (July 30^th) edition of People Management, the journal of the Chartered Institute of Personnel and Development (CIPD), Claire Warren provides an example of the importance of accounting information to HR professionals. The article touts the often cited expression ‘people are our greatest asset’, but questions how many HR professionals appreciate the full costs of people in an organisation.

According to Vanessa Robinson of the CIPD, HR professions shouldn’t ‘merely say “people are our greatest asset”, but look at the profit and loss account and see what they cost!’ The problem is that many HR professionals may not have sufficient basic accounting knowledge to understand basic accounting principles. They need to be familiar with the basic financial statements – the profit and loss account (income statement), balance sheet and cash flow statement. What this article tells us is something we as accountants already know – that accounting is a communication medium, a language indeed, that not everyone understands. Having said that, while HR professionals may not think they require fluency in accounting, they do need to make business decisions which are underpinned by sound financial information. Having an understanding of accounting information (rather than just accepting it from the accountants) will benefit HR and other professionals in an organisation. The article in People Management is a great start for anyone who wants to know the basics, so take a few minutes to read it.