The Accounting Problem and Solution

Accounting is part of one of the top 10 problems of 20^th century management

A chart of accounts is laid over the business, rather than recording the actual business

20^th century management historically has separated cash from other capital to be managed in financial management and to be accrued and recorded through accounting. The need for the separation has decreased due to technology and advanced solutions. Technology has also led to high-worth information and intellectual capital that needs to be accounted for and managed. But the separate focus on cash tends to prevent other capital of worth from being managed professionally. Capital and cash transactions that are recorded are recorded against a contrived chart of accounts, rather than accurately recording the complete financial status of the actual business.

R-pM establishes facility records capital to professionally record the actual business

Result-performance Management (R-pM) manages all capital, including currently undefined capital and “intangible assets”. R-pM manages accounts and other records of the business as facility records capital and provides performance solutions from records as information capital. Facility records are the tangible information capital of the enterprise. Facility records go beyond the limitations of accounting to record:

• Financial records for the full business cycle, including fundamental business data on performance costs, result value, and capital worth
• Non-financial records for statistical, documentation, images, and other records

R-pM requires broadening 20^th century accounting to professional records management to keep records on the actual business and to make records solutions available to produce high-value results.

The Accounting Problem

Accounting does not record the actual business

Due to 20^th century management problem number one, the business is not organized. Therefore, accounts are not maintained on the business, but are maintained against a chart of accounts laid over the business. Some aspects of accounting, like double-entry bookkeeping and accruals are useful, and basic reports are necessary. But, historic accounting prevents comprehensive financial and non-financial record capital management, thus becoming major problem in the 20^th century enterprise. The problem must be eliminated in 21^st century management.

Accounting is equated with record keeping but does not keep full enterprise records

One problem is that accounting is equated with record keeping. The modern enterprise must maintain records capital on business reality for the full business cycle including financial, statistical, qualitative, documentation, and imaged records. All records involve money and protection of enterprise assets. But, accounting restricts itself to conventional financial records. kept in accordance with accounting principles and external audit requirements, that may distort the business accuracy. Many important management records are not kept, or are kept by organization units and individuals and not managed as enterprise capital of worth to produce result value.

Accounting does not maintain full financial records

Financial records that should be kept are not kept, because accounting only records the part of the business cycle from the point money is received as cash or accruals up to the point that money is invested or spent. The input result value received for money invested or spent, the performance cost in transforming input results to output results, the value added in the transformation, and the value provided for money received is on the dark side of accounting, where few financial records are kept.

Other financial records that should be kept on much high-worth capital are not kept. The capital is not managed and much is labeled “intangible”, allowing accounting to ignore it and not account for its worth as a part of enterprise worth or the cost of utilizing the capital as a part of enterprise costs.

Accounting has not addressed many on-going 20^th century financial record problems

Many unsolvable financial record problems like intangible assets, unknown costs, unsubstantiated value, distorted capital worth, insufficient and inaccurate management information, and ill-informed corporate governance are outgrowths of 20^th century accounting. These problems can be eliminated by professionally managing the financial records of the business.

Yet these problems continue, despite the enormous sums spent to strengthen accounting and auditing and to impose more stringent and costly reporting requirements on corporations.

The Accounting Solution

Result-performance management (R-pM) provides the basis for professional records management by organizing the business to be recorded. R-pM simplifies the business to only a few entities so many of the requirements of conventional accounting are not required for 21^st century management. The accounting solution is described further in the article “Your business is your only valid account structure” at 21^st Century Management Magazine.

R-pM records the actual business, not contrived codes or structures

R-pM relates all costs, values, worth, and other recorded attributes, by defined time periods, to only two entities; results, for all enterprise inputs and outputs, and performance solutions, for all acquired, developed, and utilized capital resources. R-pM requires records on only a few other entities like suppliers, who provide input results, business partners, who provide solutions that produce results, and customers, who impart value on final results for their input results or performance solutions. Programs and projects are defined as an investment result and managed as a result-performance business structure under the final program or project result.

R-pM maintains the business structure as business organization capital. Professional facility records management uses the business structure to record all actual business performance for result value, performance costs, and capital worth, including cash and accruals, for the complete enterprise.

R-pM properly manages information capital as business data, human knowledge, facility records, and management intelligence

R-pM manages human knowledge to support human capability to utilize solutions and produce results; business data to describe solutions utilized and results produced; facility records to record and document tangible information capital in each result produced and performance solution utilized; and management intelligence to analyze results and performance for product, customer, business, market, competitive, and management information.

R-pM establishes a professionally-managed facility records capital unit to manage comprehensive facility record results, including financial, cost, and statistical accounting results. R-pM separates management accounting to analyze facility records as part of management intelligence capital.

R-pM manages facility records to produce high-worth solutions to produce high-value results

R-pM strives to make records management attractive to people who want to understand and record the business. The objective of facility records management is not administrative performance. The objective is to produce facility record results that develop facility records capital to document the undistorted business reality of the enterprise, provide record information solutions needed to produce other enterprise results, and manage the up-to-date official record capital of the enterprise.

Facility records include all financial and non-financial records

Facility records management responsibilities include all results metrics and performance indicators including financial accounting, result-performance cost accounting, result evaluations, capital worth assessment, statistical accounting, and qualitative recording. Facility records include all documentation related to results produced and solutions developed; substantiation of results; and archiving of result and capital records. Records can be documents, images, computer records, or any form.

R-pM enables financial records to be maintained for the full business cycle, in the value of results produced and the performance cost of capital consumed. Facility records are analyzed by management intelligence to derive management information.

Facility records solutions are part of the Business Information Base

Facility records solutions are enterprise information capital and form part of the enterprise Business Information Base. Facility records must reference a business data entity and be integrated with other information capital for data, knowledge, and intelligence. Records solutions can be created from data, or intelligence and provide information used to capture data, create knowledge, gain intelligence, and assess the worth of capital on-hand. Facility record solutions are integrated with or accessed through business data to produce specific results, particularly senior-management and board-level corporate-governance results.

R-pM provides the structure for professional records management

R-pM provides the structure for 21^st century professional records management. Accounting results are a set within financial record results, which in turn are a set within facility record results. Accountants have the opportunity to broaden to professional records management to maintain facility record capital and to provide facility records solutions to all levels of management to produce enterprise results.

Until accounting regulations are changed, 21^st century management will have to include special provisions for 20^th century accounting. Changing accounting is up to professional and regulatory bodies. The accounting profession should embrace R-pM to account for the complete actual business and provide professional records solutions in 21^st century management

21^st Century Management eliminates 20^th century problems

Result-performance Management (R-pM) eliminates the top ten problems and other costly 20^th century management problems. Slash costs, simplify business management, and boost competitive advantage through R-pM, the conventional method for 21^st Century Management. Review the articles under Learn the Basics of R-pm or visit result-performance-management.com to download information to learn more about R-pM.

Download your 21^st Century Management Manual today

Your 21^st Century Management Manual, The R-pM Toolkit, is available today and is under continual development to expand and refine 21^st Century Management. Get your R-pM Toolkit, and future updates, at result-performance-management.com.

This entry was posted on Friday, January 18th, 2008 at 01:33 and is filed under:
Forums: Administration and Capital Management, Processes and Information Systems, Corporate Investment and Governance, Strategy and Performance Management, Top Ten 20th Century Problems
Topics: Capital Management, Conventional Management Methods, Cost Management, Enterprise Worth, Records Management, Value Management
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