Accounting literacy is an indispensable skill for the legal profession, says Peter Frampton of Color Accounting International — yet most lawyers have few opportunities to develop it.
“Whether drafting a contract, conducting due diligence, winding up an estate, engaging with expert witnesses or defending a client accused of fraud, a lawyer who cannot speak the language of accounting fluently is at a severe disadvantage,” says Frampton. “Yet the accounting training lawyers receive is typically cursory and superficial. It tends to focus on mechanics rather than deep understanding, and many people struggle to acquire this essential knowledge once they are in practice.”
Unfortunately, says Frampton, “accountants think in numbers, not words; they’ve never had to develop clear language, so it has become opaque, inconsistent and deeply confusing. For example, in seeking to understand the word “expense”, the most popular interpretation – that it’s when cash goes out of a business – is misleading.”
As a result, says Frampton, “I’ve had high-level corporate lawyers and investment bankers confess to me that even as they’re drafting funding and prospectus documents for major bond issues or listings, they don’t truly understand fundamental concepts like profit and EBITDA (earnings before interest, tax, depreciation and amortisation). The fear is palpable.”
Frampton says most courses in financial literacy for non-accountants leave people little the wiser because they fail to address the basic conceptual confusions in accounting language. “This is especially frustrating for people in the legal profession, whose work is all about the careful interpretation of language. Accountants know in their bones the difference between income and cash, but they can’t explain it in words.”
The Color Accounting system, says Frampton, defines accounting terms clearly to eliminate conceptual confusion, and presents them graphically in a way that enables people to grasp core concepts quickly and deeply. “We’ve refined the basics of accounting to two verb concepts, income and expenses, and three noun concepts: assets, liabilities and equity .”
The system has proved popular not only in South African legal circles, but abroad as well. “We are training many of New York’s largest law firms, and working with three of the United Kingdom’s “Magic Circle” of five leading firms,” says Frampton. “The courses are so popular they have waiting lists and even senior partners give up precious billable time to attend the seminars”
“Accounting may be complex, but it’s not intrinsically difficult to understand,” says Frampton. “At Color Accounting it’s our mission to take this important form of literacy to everyone who needs it.”