Rule No. 4 for 21st Century Business Management: Keep financial and non-financial records on full business operations and development
20th century management does not maintain accurate financial and non-financial records on the business
Records are tangible information capital to record and document the actual business. Records are the predominate information capital in 20th century management. But, 20th century management does not manage enterprise records as capital. Most records are maintained by an individual or organization unit. There is no defined responsibility for maintaining records on the business. 20th century accounting maintains partial financial records against a contrived chart of accounts. Some corporations have a secretarial function to maintain corporate and shareholder records. Each enterprise has to develop its own procedures to see that important records are kept. Many important business records like proposals, designs, quotations, and documentation are maintained ad-hoc by a department or individual or simply get lost in the passage of time.
Financial accounting is often confused with business record-keeping
An earlier article in The Business Change Forum says that “Accounting is one of the top ten problems of 20th century management”. Many people think that financial accounting keeps enterprise records. In some enterprises, accounting does attempt to keep records beyond the specified accounting documents. But, in general, accounting views its function in narrow terms of financial accounting and following generally-accepted accounting principles. Financial accounting does not account for the actual business, but lays a contrived chart of accounts over the business. The chart of accounts records accrued and actual cash expenditures and receipts. The actual value received for cash expended, the costs incurred and value added in the business, and the actual value provided for cash received is not accounted for.
Some capital worth may be maintained on depreciating assets, but most capital is not recorded. Much high-worth capital is simply labeled “intangible assets” by accounting and the worth is not recorded. Since capital and the utilization of capital items in the business is not recorded it is not possible to record the return on capital investments through the value created in the business.
Enterprises are now setting up records management units and solutions separate from accounting
The need for professional records management is becoming acute with the explosion of records entering and leaving the enterprise in emails, file transmissions, imaged documents, etc. Enterprises have no way to reference records to the business and no consistent business methods for records management. Enterprises are now laying additional information classification structures over the business and investing in record, document, report, image, and other management systems. This only aggravates the records management problem with additional units, data entities, and overheads. The records management problem will only get worse and can never be solved by more 20th century management structures.
Rule No. 4 of 21st century business management: Keep financial and non-financial records on full business operations and development
The business is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. In order to record the business all investments in the business must be recorded as specific capital solutions with the cost of the investment to be amortized over the life of the solution and to know the solution worth and the return on the solution investment. There is no such thing as “intangible assets”, since all capital requires an investment to acquire or develop. All economic output results produced by the business must be recorded to record the value created by the business, the costs of producing the value, and the value-added by the business. Each capital solution must be implemented to produce specific results, so that costs can be recorded for each result produced, and unknown costs are eliminated.
20th century records management problems are eliminated by organizing the business for 21st century management. Rule No. 4 of 21st century business management is “Keep financial and non-financial records on full business operations and development”. First the business is organized to reduce records maintained to those related to an actual business entity. All financial and non-financial records of the enterprise business are capital maintained to be utilized to operate and manage the future enterprise. Information capital solutions are developed from record capital for operational and management needs. This is explained further, in the article “The business is the only valid chart of accounts”.
Facility capital manages the tangible assets utilized by the enterprise business
Facility capital manages all the tangible capital and facilities of the enterprise. There are three classes of facility capital:
- Readiness capital in Facility Equipment: Facility equipment includes all reusable tangible assets including infrastructure, networks, operating software, financial facilities, digital assets, and property. Facility equipment gets an organization ready to produce a set of results
- Production capital in Facility Supply: Facility supply includes all consumable cash, energy, collateral, and other supplies. Supply capital is consumed, when producing specific results
- Information capital in Facility Records: Facility records include the tangible information in the enterprise in documents, records, images, archives, intellectual property, etc. Record capital provides record solutions to produce results, and to document results produced
Facility capital is managed by human capital with administration capability and experience with the particular capital.
Facility records capital manages the tangible information of the enterprise
Facility records are the tangible information capital in the enterprise that record and document business initiatives, decisions, and activity. Facility records maintain full financial and non-financial records of the complete business cycle for both operations and development. Financial, statistical, and qualitative records are maintained for all business activity that incurs a performance cost and creates value in results in process. All records are referenced to the business in a specific result, performance domain, capital solution, enterprise, time period, business descriptor, or other maintained business data entity. Originals are maintained of documents, computer files, or images to substantiate business activity, to have records available to produce future results, and to meet retention requirements. Data captured today against structures laid over the business is inaccurate and not related to the actual business. This data is no longer captured and maintained, significantly reducing the information processing workload. Facility records management follows the rules for information management outlined under Rule No. 3: “Organize and manage capital for high utilization and return“.
Facility records capital maintains financial records on the full business cycle in operations and development
Each time a volume of results are produced by utilizing implemented capital solutions, business transactions are generated to capture actual business data by the performance domain identified by the result and the capital solution. Facility financial records are maintained against the actual business structure for capital solutions utilized and results produced. From this record, information can be aggregated by set and key result, business line, organization or responsibility center, product, service, work in process, capital category and class, and other totals. If required, additional 20th century accounts may be maintained to meet regulatory requirements. Financial records cover the full business cycle to record accrued and actual cash expenditures and receipts, plus performance costs, result value, and result value-added. Records are maintained on the capital sets that are utilized as solutions to record capital costs, understand contribution to result value-added, and assess capital worth. Records are maintained on the negative capital worth of liabilities accepted by the business.
Management accounting, information analysis, etc that provides management information solutions from the analysis of accounts or business records is management intelligence capital, which utilizes a different set of human capabilities from records management.
Professional facility records management provides records solutions for good corporate governance and management
Traditional accounting is broadened to professional facility records management in 21st century business management. Professional records management captures correspondence, documents, and computer files on all business initiatives, decisions, transactions, and follow-ups. All records are referenced by specific business data entities. Documentation records are maintained on results produced and capital implemented as solutions. Professional records management maintains complete facility records related to specific business entities, and develops information capital solutions from the aggregation and manipulation of facility records to produce operational and management results.
The information capital solutions cover the reports and statements traditionally produced by accounting as recorded against the actual business. Information capital solutions include a new range of operational and management information produced from the added financial records and the combination and manipulation of financial and non-financial business records.
Result-performance Management (R-pM) provides the method to organize the business and utilize human and other capital, where needed to produce results
The source of knowledge for corporations to organize and manage their business is Result-performance Management (R-pM). R-pM shows how to organize results to be produced and then how to deploy and implement capital solutions where needed to produce results. Once the business is organized the business can be managed directly, without the need to lay enterprise organization and management structures over the business.
Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21st century management conventions, definitions, and standards. Management consultants who base 21st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. R-pM and business management are supported at result-performance-management.com.
The Solution to the Economic Crisis is explained in free downloads
Three free white papers explain the dead-end 20th century management problems, such as the failure to plan, account for, and manage the actual business, that caused the economic crisis, the way to eliminate the problems, and a government program to address the crisis by stimulating the economy, solving the problems, building a structure for financial and economic management, and organizing local businesses to flourish in the eventual recovery.
- How to Eliminate Problems that caused the Economic Crisis explains the major unsolvable 20th century management problems and the solution to eliminate the problems
- Business management; the only Solution to the Economic Crisis explains how to plan and manage the business to capture business data and provide management the information needed for actual business, corporation, industry, and economic management
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These three white paper downloads are available to R-pM Community Members at Result-performance Management.com. There is no cost or obligation to join the R-pM Community. Join by entering your email address and personal password. Your email address is protected and used only for download problems, product updates, and occasional R-pM Member news and white papers.
