This is a presentation about how I introduce TRANSPARENCY to companies in order to improve day-to-day management and planning. Data input is minimal, the quality of output is incomparable with off-the-shelf accounting packages.
The six minute video is a composition of a 30 minute presentation I make to explain how the systems work.
All the images are of real systems with redacted information and figures changed for illustrative purposes.
Without exception my clients understand their business to extraordinary levels of detail – because they can see it – all and any of it – all the time.
Modern computer administration/accounts systems are “Black Boxes”. We don’t know and can’t see what goes on inside them.
- We put information into the Black Box.
- We ask the Black Box to give us reports.
- We then go and analyse those reports elsewhere – typically in a spreadsheet.
Every time we put in new information, we have to ask for a report again. And do our analysis again. This can make basic checking of work and supervision difficult – to check some input, we must call for a report. And if we find things we need to change Black Boxes are often obstructive. We may only want to change, say, a couple of accidentally transposed figures, but may be obliged to follow lengthy procedures to satisfy the Black Box.
The Black Box determines how we can access and use our information. The Black Box dictates how we administer our business. Black Boxes are, obviously, produced for ‘anyone’ so we have to make the choice between squeezing our business into the Black Box’s way of doing things, or figure out how we might configure the Black Box and its outputs to satisfy our requirements for formatted information. As I wrote in this blog, “Surrendering to technology is not the same as leveraging it.”
History is instructive
The technique of double-entry bookkeeping is over 500 years old. There are tremendous merits in the basic techniques, not least of which are their transparency: what one writes, one can simultaneously read. However, the ‘simple’ and separate ledgers (lists of transactions) then required skilled people to convert them into Profit & Loss account reports and Balance Sheets.
Since the 1980s computers have enabled basic data entry to be converted into P&L accounts, Balance Sheets and other useful reports “at the press of a button”. Data goes into a Black Box and reports come out – but this is at the expense of transparency.
40 years – a couple of generations – of Black Box users has led to a quasi-religious belief in the outputs of the Black Box. And, despite the best intentions of Black Box producers, a blindness and loss of understanding about the fundamental purposes of accounting.
One step back …for one giant leap forward
In the last handful of years there has been a profound change in computing: ‘The Cloud’. If The Cloud had been available in the 1980s Black Box culture would not have arisen.
The classic ledgers of old are the best way of presenting a list of transactions (ironically, they are actually difficult to extract as a report from Black Box systems!). Nothing beats a list of money spent or money earned for visually representing the quantity, magnitude and concentration of transactions. A longer list than last week shows a busier week. Sorting or filtering the list by date, value, supplier, customer, or any other metric of interest provides immediate output.
The ledger information feeds all the reports and analysis that matters directly. Enter a fuel receipt and see not only that a fuel receipt has been added to the purchase ledger but also that it has increased the amount spent on fuel for the month, that this month more was spent on fuel than last month, and that profit has reduced by the value of the fuel receipt. See the costs and profit of related jobs or vehicles change – real-time – as the fuel receipt is entered. You can see what has been entered AND its effect, immediately.
Something else that directors and managers benefit from with my systems is looking at ‘what if’ scenarios. If one wants to, say, double turnover, it is possible to see in granular detail everything that is required to meet such a target. More basically, what happens if diesel increases by 10p per litre? What effect does a certain supplier’s 5% price increase have? What happens if we use ‘this’ instead of ‘that’?
There are approximately 2,000 working hours in a year . Your profit target is a function of what happens in all 2,000 of those hours for every member of staff. I provide my clients with tools that allow them to watch revenue and profit generation by the hour.
Most powerful of all is being able to watch the business progress, visually. Watching enquiries make their way to cash and watching your business home in on its targets can be as addictive as ‘dot watching’ on live maps of international cycle races.
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