accounting&business

The magazine of the

Association of Certified

Chartered Accountants

 

 

 

 

Elaine Saunders

takes us on an intriguing journey back in time to discover how some of our favourite - and not so favourite - business terms first came about 

Business and financial jargon is so much a part of our everyday speech that we give little thought to its derivation.   We may assume that the Information Age gave us our buzzwords but the lingua franca of business is considerably older.   Many words have surprising derivations - from church to battleground - and together they provide an interesting commentary on our modern commercial world.

Cheques and cheats

Britain's Exchequer, at almost a thousand years old, is a rich source of jargon.

 

To keep track of the King's finances, court officers, or escheators, used pebbles on a checked cloth as an abacus, so calculations came from the check.   Bills drawn against the court were cheques and the infamous dishonesty of escheators gave us the concept of cheating.

 

For an illiterate population, any record needed to be easily interpreted.   Hazel sticks carved with different sized notches were split lengthways into identical halves.   The person advancing money to the King took one (the stock or foil) and the Court retained the other (counterfoil).   These tally sticks (after the French tallier, to cut) existed until 1834 and the clerks were talliers or tellers.  

 

Bank and bankrupt

Although not as old as the Exchequer, banks have existed as financial institutions from the 15th century.   Italian merchants conducted business across a trading bench, or banca, and the term soon described any venue for financial dealings.   If the merchant's business failed, his goods were seized and his bench rotta, or broken.   From Old Italian, banca rotta became anglicised to bankrupt.

                     

Broke, as in financially embarrassed, has a different derivation.  16th Century European banks issued early credit cards; small ceramic tiles embossed with a credit limit.   The customer presented the tile with each request for funds but, if he exceeded his limit, the teller broke the tile.  

 

Brokers had nothing to do with broken tiles, however.   Broke in this case comes from broach, the spike used to open wine barrels.   Broachers bought the wine to sell it on and eventually a broacher or broker was the name given to any middle man.

 

Called to account

In the Middle Ages, the clergy were often the only literate men in the district and so acted as secretaries or clerks to their wealthy patrons.   The American pronunciation of klurk is a residue of this connection and, up until the 17th Century, a clerk could be either a record keeper or a clergyman.

 

Written accounts were therefore useless and the practice evolved of presenting them verbally.   As Latin was the language of the church these hearings were called auditus or audits, and cathedrals had audit rooms for transacting business.

 

It would be another 200 years before the first use of the word 'accountant' in 1539. From old French a (to) and cunter (count), an accountant became a professional keeper of financial records.  Any words to do with calculation come from the same root, such as compute and comptroller.

 

To coin a phrase

When the Norman French invaded Britain in 1066, they imported their own coins; small silver pennies impressed with a star.   Norman French for small star was esterlin, which by 1124 had become Sterling.  

 

As coins were minted from precious metal, the edges were often clipped to steal some of their value, so they were weighed rather than counted.   Two hundred and forty esterlin weighed exactly a pound, which gave rise to the Pound Sterling.   (And also the reason behind 240 pennies to the pre-decimal Pound.) 

 

Another imported coin gave the United States its own currency.   The Joachimstaler came to Britain from Czechoslovakia in the 16th Century, the name later shortened to taler.   Scottish settlers in America noted the resemblance between the taler and the Spanish Peso in popular use, and gave it the same name.  

 

By 1785, the pronunciation had evolved still further and Thomas Jefferson recommended to Congress that the Dollar become the official unit of currency.   He even used the French word dixieme for a tenth of a dollar, which eventually became disme and then dime.

 

Some say the dollar sign is the letters U and S superimposed or even T and S (Jefferson's initials).   Another theory relates back to the Spanish Peso, which was often cut into eight pieces called bits to make small change (and the pirate's parrot's cry of Pieces of Eight).   The $ sign is therefore thought to be a figure 8 cut through.

 

'Where there's muck'

Coins, however, were for the wealthy whilst the rest of the population relied on barter.   Livestock formed the most valuable commodity for most families and many wealth-related words have their origins in the farmyard.

 

Capital, chattel and cattle share a root that harks back to Old French and literally means wealth from livestock.   Old coins carried the head of sheep or oxen as a sign of their value and, as Latin for livestock is pecus, we now use pecuniary when describing monetary transactions.

 

So few coins could be contained in a small bag, or bougette, so budget came to mean total wealth.   This lack of ready money and the use of barter ensured most transactions were conducted face to face so financial dealings were restricted to small localities or were purely personal.

 

For example, economy comes from the Greek for household management, and its wider sense of political economy was unknown until 1651.   Even investment was a closely personal term.   The original Latin meant to clothe and this has survived in reference to clerical vestments or robes of office.   Over the centuries, it developed to include changing clothes and eventually to change in general.   By the 13th Century, Italians used it to describe the alteration of one form of capital to another; the meaning picked up in England in the 1500s when huge sums were committed to the East Indies trade.  

 

Battling on

The corporate world is still a battlefield so it's no surprise that many phrases have military associations.

 

Company is a combination of com (together) and pnis (bread) and translates as a group breaking bread together.   Until the 13th century, it solely described a band of soldiers but then the British trade guilds adopted it for their new livery companies.   Three hundred years later it was in general commercial use.

 

Marketing relies on targets, strategy and branding, all of which originate on the battlefield.   A targe was a light shield used by German forces and failure to meet modern targets still results in being shot at.   Stratgi described the Greek office of a general responsible for formulating battle plans, and this lead to its application to any planned course of action. 

 

Branding is essential in these televisual times to burn a company name into the public consciousness.   A brand was originally a lighted torch or sword (hence brandish a weapon) and slogan is no less combative.   Sluagh-ghairm is a Gaelic phrase for shouting multitude or battle cry, and although it wouldn't satisfy modern copywriters, it served the Scottish Clans well.

 

Any other business?

Of all the definitions, perhaps the meaning of business itself is the most telling in today's times.   It originated in old English Northumbrian dialect and described anxiety or care.

 

How little changes!

 

 

 

   Dressing down days

         Turning the daily commute into telecommute sounds great, but there are drawbacks,

                                                says Elaine Saunders

 

Home working was given a slight fillip in the Budget, with new rules allowing employees to claim unspecified expenses up to the princely sum of £2 without paying tax or national insurance.   Although this alone is unlikely to change work patterns, thousands of people are hoping that new flexible working legislation will enable them to work from home for at least part of the time.   But employees often find the reality of home working less than perfect.   'Although home working can help organizations save money on office space, it has serious downsides,' says Hannah Forbes, a director of management consultants Optimise, who made an in-depth evaluation of outworking.   'Both parties need to think through when and why home working will work for them.'

 

Before taking the decision to telecommute you ought to be aware of the most common misconceptions:

 

I want to spend more time with my children

Theoretically you'll be there at bedtime, can eat dinner with the children and share quality time.   However, children don't play quietly in the corner.   On school days they're home by four, letting off steam.   During the holidays there's no respite and it's unrealistic to expect them to tiptoe around you.  

 

Babies and toddlers are, potentially, a bigger distraction, even if they're taken out while you make important calls.   The BBC ran an online message board on telecommuting - 'Working from home: help or hindrance' - and the major complaint was the disruption of children.  

 

I can spend more time with my spouse

While some relationships may thrive on having both partners at home, equally as many will feel the pressure of being together 24 hours a day.   A full-time mother sees the home as her domain and a home-working husband shifts the dynamics of the household.   From being autonomous she is suddenly accountable for her movements and may resent this.  

Many men posting to the BBC message board said their wives expected them to do more around the house.   Home-working equates with availability.  

 

I'll work fewer hours

Losing the commute could add two hours to the outworker's day but few people are motivated without deadlines or office pressure.   Work expands to fit the time and a slower pace means longer hours, particularly if you stop to check the score in the Test match.   'I often have to work in the evenings if I've been distracted during the day,' says Sue Thomas, who runs her marketing consultancy, Bridge The Gap, around her two boys.  

 

It's also difficult to switch off when work is just the other side of the study door.   The work/life balance disappears, leaving the outworker permanently 'on call'.  

 

I'll do more work without distractions

While a busy office has myriad diversions, emotional factors such as loss of friendships and community can play a major role in the failure of telecommuting.   It is impossible to overestimate the importance of being on the spot to pick up on unofficial information beside the coffee machine.  

 

There's no boss on my shoulder

True, but there's no one to delegate to, either.   Tasks like photocopying must be done by the home-worker, reducing chargeable hours.  

 

Your presence in the office implies you're working, even though you may coast some days.   From home, you're judged solely on output.   Home-working may even affect your promotion prospects as you're invisible to colleagues and management.   When it comes to redundancy, will they choose a friendly face or someone no one ever sees?

 

I'll be more comfortable at home

Dressing down at home may seem ideal but not if you're trying to combine home and office space.   'Being professional from the kitchen table is tough,' admits Hannah Forbes.   A separate study is almost a necessity.  

 

The outworker must also have clear guidelines on the provision of phones and computer connections.   Facilities must also be available for meeting clients.   The employer may be burdened with set-up costs or complications under existing health and safety, data protection or employment regulations.  

 

And Forbes thinks: 'losing face time and spontaneity can reduce overall effectiveness' from a company point of view.  

 

www.optimiselimited.co.uk

 

 

You can't rely on the intestacy

 rules to make the right financial

provision for your family or save

you tax.   That's why everyone

needs a well drafted will,

 says Elaine Saunders

You may consider yourself financially astute, having spent your working life making investment decisions to meet your family's needs - but all your good work will come undone if you die intestate.

 

And many still do because they naively assume that their entire estate will automatically pass to their spouse or children.   Unfortunately, the Intestacy Rules say otherwise.   That's why making an effective will can be as important as making the right investments.   It not only ensures that you exercise control over the disposal of your estate, but also allows you to make gifts to charity or friends - and reduce or avoid an inheritance tax bill.   You can appoint guardians for your children, choose executors to administer your affairs and give them specific powers not granted under general law.

 

But despite these financial planning benefits, at least half of the adult population of the UK is still without a will.   Even those that do venture inside a solicitor's office often don't give enough thought to their ultimate wishes.   Some don't even have basic information such as beneficiaries' names and addresses.   So it's worth addressing the key questions now to ensure your will-making is both stress-free and cost effective.

 

Who will benefit?

Your will determines how assets are distributed or sold, how legacies and expenses will be paid and how the residue is managed.   And if you don't have a will, long-lost relatives could end up benefiting at the expense of your loved ones.

 

For married couples, wills tend to be mirror images - with everything passing to the surviving spouse and gifts over to the children or grandchildren. For example, if a daughter dies leaving children they will inherit their mother's share under their grandparents' wills

 

Many people naively assume

 that their entire estates

will pass to their spouses

or children.  Unfortunately,

the Intestacy Rules say

otherwise

Many people naively assume

 that their entire estates

will pass to their spouses

or children.  Unfortunately,

the Intestacy Rules say

otherwise

Many people naively assume

 that their entire estates

will pass to their spouses

or children.  Unfortunately,

the Intestacy Rules

say otherwise

But if you divorce and remarry, you may need to make provision for family from an earlier relationship - particularly if there is a legal obligation to provide financial support during your lifetime.   If you don't, there could be grounds for the excluded person to contest the will and claim a share of the estate.  

 

So you need to ensure your solicitor has full details of any previous relationships, maintenance orders or anyone with a possible legal claim.   Your solicitor may suggest a clause giving reasons for your failure to make provision which the Court will take into account in any future dispute.   For example, parents may prefer to leave their estate to children who keep in close contact rather than one estranged for a number of years.    

 

Adult children usually take equal shares in their parents' estate.   But you need to ask if this is appropriate for your family.   If one child is less financially secure, you may want to leave them a bigger share.   Sadly, large sums of money often divide families, so it's advisable to convene a family conference to discuss your ideas and prevent rifts later.  

 

Cohabitees and single sex couples

For unmarried couples it is even more important to make a will.   The Intestacy Rules give spouses at least a partial right of inheritance but there is no such safeguard for a common law spouse or partner.   So, unless you make adequate provision your partner could lose the family home or jointly saved funds held in your name.   Relationships with wider family may be more complicated too and they could have the power to take away property you want your partner to keep.   A stepfather may not even have the right to retain custody of his girlfriend's child despite having been a loving parent for many years.   A court battle will only add to an already distressing situation so it is best to formalise such wishes in your will.

 

Children

If you have children, you need guardians to care for them should they be left parentless.   Without a will, the courts have power to appoint on, but it may be someone you would not have chosen.  The guardians assume full parental responsibility and have physical care of the children so they must be consulted and agree to their appointment. 

 

They may also have control of the children's trust fund, although this is not necessarily desirable.   It may be wise to have separate trustees to avoid any conflict of interest between the long-term investment of the fund and the guardians' short-term view of the children's needs.   Very often the executors act in this capacity.   However, this is an area of huge potential conflict so only appoint people you feel will work in harmony for the benefit of the children.

 

The standard guardian and trustee clauses will ensure your children are fed, clothed and educated from the proceeds of the fund.   If your family has unusual requirements you must make your solicitor aware of them so he can see adequate provision is made.   For example, a child with special needs or an exceptional musical talent may need to draw more heavily on the trust to secure a better education or care.

 

Also, consider where the new family unit will live.   There is no automatic right for the guardians to buy a bigger house, even if it is physically impossible for the children to share their existing home.   Specific provision must be made.   Under law the children will inherit the entire fund when they achieve maturity.   You know your children better than anyone and may think it unwise to give such a substantial sum to a teenager.   If so, ask your solicitor to add a clause delaying inheritance until, say, they are aged 25.

 

Executors

Executors are charged with winding up the estate.   They are responsible for selling or collecting in assets, paying expenses and ensuring correct distribution of the residue.   Again, you must notify them of your desire to appoint and obtain their consent because if they are also appointed trustees there will be a continuing liability to act on behalf of the trust.

 

Their powers under the will come into effect at the moment of death so they can begin the administration before probate is obtained.   If you die intestate, administrators are not appointed until after the grant of letters of administration which could take many months and your estate is effectively frozen in the meantime.  

 

There is wisdom in appointing the major beneficiaries to act jointly but circumstances may inhibit this.   Theoretically it is possible for a lay person to act but most ask a solicitor for help.   Obtaining probate is a very complex procedure and whilst a solicitor will bear the brunt of the paperwork consider having at least one executor with business expertise.

 

You can appoint a bank or legal firm as executor but there are disadvantages.   It is more expensive (bills are often rendered according to the value of the estate) and you have no control over the staff acting for you.   To retain authority and save costs, it is much better to appoint family members and let them seek out reliable advice.  

 

If you die intestate your administrators have restricted powers of investment under general law.   By appointing executors and trustees by will, you can grant them wider powers.   This may be less secure but more appropriate to the given circumstances.  

 

How to make gifts of money and valuables

You may wish to make gifts of money to wider family or friends.   This is known as a pecuniary legacy.   Before you see your solicitor decide on the amount you wish to leave each person and take full names and addresses with you, together with ages if under eighteen.   These legacies are always paid from your net estate before the remainder is shared, thereby reducing the final figure.

 

Charitable donations are exempt from Inheritance Tax and must be to a specific charity.   You are unable to leave a vague gift to cancer research or animal shelters.   The will must contain the correct name and registered office.   Leaving money to your old school, for example, might not be an exempt donation so check the charitable status of such institutions if this is an issue.

 

You may also want to leave a particular item, or specific legacy.   A lifetime promise to make such a gift is not binding on the executors - it must be contained in a properly witnessed will.   Any specific legacy must be fully described.   My green vase is too vague.   My green Royal Doulton vase with Chinese lettering is much better.   Remember that the gift will lapse should you sell or break the vase before you die.

 

Similarly gifts of jewellery must be properly described but if you want to leave it all to one person there is a special clause to obviate the need for scheduling every piece.

 

A specific gift of real property (i.e. land and buildings) is not normally made.   Instead the will speaks in generalities such as all my property both real and personal or even any house I may own at the date of my death.    This guards against failure of the gift should you sell your house before you die.

 

Advice and costs

If you get married, any will you have already made will automatically be revoked, unless specifically made in contemplation of your intended union with a named person.   Similarly, if you get divorced any gifts to an ex-spouse may be rendered inoperative and you must check that your divorce settlement excludes any claim against your estate by a former spouse.  

 

Buying a house, starting a family or having all your children reach eighteen are all cues to re-examine your bequests or tax planning measures.

 

A standard will for a husband and wife could cost less than the average weekly food spend.   So there's no good reason to put off making one.   Solicitors will provide a quotation of fees in advance.   Wills are often drawn up by the more junior members of law firms, and while they are completely competent to take instructions for most wills it is a good idea to consult a senior practitioner if you have complicated family circumstances or detailed tax planning needs.

 

Your solicitor will need: -

  •  Full names and addresses of everyone receiving a benefit, mentioned in or appointed by the will,

    with their age if under eighteen

  •  A clear idea of who will share the bulk of the estate

  • Details of monetary gifts and charitable legacies
  • Intended Guardians and Executors/Trustees
  • Details of a previous marriage, relationship, children and divorce settlements.
  • Any special family circumstances that need to be taken into account such as special needs children or family living abroad.
  • A long list of questions!   It won't label you as clueless - it shows how much thought you've given to your will

Your solicitor won't need: -

  • A professional valuation of your estate or a list of assets.   Your financial circumstances will alter before your death so the will is couched in general terms.   If seeking in depth tax-planning advice however your solicitor will need more detailed information.
  •  A list of current debts, mortgages or other liabilities except where the payments are to dependants who may claim a share of the estate.  
  • It is unwise to include details of your funeral arrangements in the will because it very often isn't read until after the funeral.   Instead make your family aware of your wishes.

The above article is for interest only and must not be seen as a substitute for

proper legal opinion.   Always consult a solicitor for up to date advice and guidance  

 

 

 

 

 

 

 

 

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