Archive for the 'Enterprise Worth' topic

What is the business and capital as part of the business?

The business is defined as “the utilization of capital in performance to produce value in results”. Every business in the world invests in capital needed, in order to utilize capital in performance, in order to produce output results. The capital must have a worth that justifies the investment costs for acquisition or development and implementation as performance solutions.

Capital is the investments in the business to have the capability to produce results

The only reason to invest in capital is to provide the capability to produce results. Capital is all the tangible and intangible assets available to be utilized by the business. Capital includes the business organization, processes and systems, humans and their capabilities, facility equipment and supplies, management plans and tactics, and information capital. Capital has a worth in the capability to create result value-added attributable to the capital over the capital life.

20^th century management fails to organize and manage capital as part of the business

Today, people think of capital as items in an asset register or on the payroll, rather than as items to be managed and utilized as part of the business. Businesses invest in enormous sums of money capital and then fail to identify the specific capital items developed, the costs of developing the capital, the worth of the capital as developed, the utilization of the capital to create value, the cost of capital utilization or consumption as capital worth deteriorates, and the value created to return the original investment. [more...].

Corporate Governance is one of the top 10 problems of 20^th century management!

Corporate Governance problems are “solved” my more imposed governance

We have all heard of the recurring crisis in cooperate governance. Governing the corporation is a big problem because we cannot manage the corporate business. We overlay a myriad of contrived structures on the business to organize and manage various entities like units, functions, activities, processes, objects, jobs, etc. Corporate governance itself may be through a contrived corporate governance structure laid over the business to extract and reconcile information from other overlaid structures.

Corporate governances problems are “solved” by adding to the problems with more stringent and costly requirements for outdated 20^th century accounting, auditing, and compliance reporting.

Corporate governance problems must be solved through governance of the actual corporate business

Corporations will be governed effectively only after corporation businesses are organized and managed. The strategic corporate business must be defined as strategic results and the new and improved performance solutions to produce the strategic results. Result goals and performance expectations must be established period by period to the strategic horizon. Corporate governance can then manage actual result value creation against goals and strategic estimates, corporate responsibility for actual business practices, and corporate information capital as part the actual business. The solution to the corporate governance problem is Result-performance Management (R-pM) to organize the corporate business for 21^st Century Management. Review the article “Seeking Good Corporate Governance by strengthening Bad Governance” at Result-performance-Management.com.

Corporate Governance Problem

We overlay structures on the corporate business, and fail to organize the business

We do not organize the business. Instead, we lay many structures over the business for organization, strategy, planning and budgeting, business processes, information systems, performance management, accounts, administration, etc. We gather data on all the entities used and compile a wide variety of management and statutory reporting, but we cannot capture actual business data. Each overlaid structure creates business and information complexity, obscures the view of the business, and compounds the problem of corporate governance. [more...].

Financial Management is one of the top 10 problems of 20^th century management

Financial Management manages money separate from other tangible assets

The early 20^th century enterprise was concerned about managing and protecting cash. Financial management fundamentals were established to manage actual and accrued cash from the point received until the point that it is invested or spent. Financial management problems such as unknown capital worth, unknown costs, unknown value creation, and unknown return on capital investments have never been solved by traditional financial management. Financial management tends to be equated with capital management. This allows non-financial capital to be administered, rather than managed, or to be labeled as “intangible assets” and not accounted for or managed. Today, financial capital is managed largely by computers. Non-financial capital and intangible assets are an increasing percentage of enterprise worth and must be managed properly.

R-pm manages financial capital with other tangible facility capital to create value in results

Result-performance Management (R-pM) utilizes conventional financial management capabilities to manage all tangible facility assets in the 21^st century. Financial assets and facilities are a sub-set of reusable facility equipment, cash is a sub-set of consumable facility supply, and accounts are sub-set of facility financial records.

All facility capital requires similar application of expertise to operate and maintain, to supply, and to record. R-pM ensures that all facility capital is supported for operation and development and for utilization to produce value in results.

R-pM also integrates financial parts of other results that have been separated out. Management strategy capital includes financial strategies as an integral part of management strategy solutions. Investment management results manage shareholder funds for investment, capital development, and shareholder value results.

The Financial Management Problem

20^th century financial management gives us intangible assets, unknown costs, unknown value, and unknown worth

Now, as we go into the 21^st century, there is a growing need to go beyond financial management fundamentals and change the way enterprise capital is managed: [more...]

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. [more...]

Accounting, today, does not maintain accurate business records

20^th century management does not organize or manage the business. This makes it impossible to keep records on output results of value produced by the business and the consumption of capital in costs to produce each result. Instead of recording the actual business, a chart of accounts is laid over the business to record income and expenses and the worth of certain known assets. 20^th century accounting records the cash generated and spent by the business, rather than recording the complete development and utilization of capital and the complete economic output results produced by the business.

Accounting, today, contains many unsolvable 20^th century problems

Accounting is one of the main unsolvable problems of 20^th century management. Accounting is separate from the actual business, keeps only a sub-set of needed financial and non-financial business records, keeps records against a contrived chart of accounts and not the actual business, sees it role as control rather than capital management and business support, allows financial management problems such as intangible assets and unknown costs to persist, does not provide complete and accurate business information needed for corporate management and governance, and on and on.

R-pM accurately records and accounts for the actual business for 21^st Century Management

21^st century management uses Result-performance Management (R-pM) to organize the actual business as one integrated business structure. The business structure replaces all organization, accounting, planning, performance, costing, reporting, and administration structures laid over the business. R-pM employs professional records management to manage facility records as capital, to maintain complete and accurate financial and non-financial records on the actual business, and to provide information performance solutions from records for good corporate management and governance. Records management is integrated within the business to be utilized to make decisions at all levels and to record accurately actual business decisions made.

The business is the only valid account structure

The business structure organizes the economic output results of value produced to give revenues and income, the capital in performance solutions utilized to incur costs, and the positive worth of capital as assets and the negative worth as liabilities; to provide the only valid account structure. The business structure is professionally maintained as a business organization solution to represent the actual business accurately. Accounts are maintained by professional facility records management to maintain full financial, statistical, and qualitative records on the complete business. The actual business provides the chart of accounts and records are updated from actual business data on result value produced, performance costs incurred, result value-added, and capital worth. Complete and accurate records are maintained on the full business cycle and the full business scope across the enterprise.

This is explained further in the article “Your Business is your only valid Account Structure” in 21^st Century Management Magazine. The guidance needed to organize, manage, and account for your actual business is provided in the R-pM Toolkit, your 21^st Century Management Manual, which can be downloaded from Result-performance-Management.com. .

A business enterprise has a name and may have a legal structure

Every business has a name or some label to identify the business. There is usually a requirement to structure a legal business entity. The business enterprise provides a structure for a business as corporation, company, institute, government agency, association, partnership, individual proprietorship, etc. The enterprise can be named to identify the business and provides the structure within which to describe a business.

An enterprise defines the scope of results to be produced by a business

The logical definition of business is “the utilization of capital in performance to produce value in results”. A business enterprise then also should provide the business structure of results and performance solutions that define the business. The business enterprise then is a business structure that utilizes capital in performance to produce value in results.

The enterprise provides an identifier and label for an integral set of business results, and the performance solutions utilized, that form the enterprise business structure. Every result produced within a business is assigned to the enterprise that contains the business structure. Every performance solution utilized within the business is assigned to the enterprise that contains the business structure.< [more...]�

Why do we have unrecorded and “intangible” assets that we do not account for? Why do we have unknown costs? Is this acceptable financial and capital management? Much capital investment is not recorded as a specific asset to know development cost.
There is no such thing as intangible assets or unknown costs. What we have is unmanaged capital and unrecorded performance solutions that prevent knowing capital worth, performance costs, and return on investments. We must have a record of all capital and the development costs to manage costing and the return on investment.

We manage capital as individual entities rather than one set that includes all capital

Capital used in performance is not managed as one set that includes all capital. We administer historically known and accounted for assets as separate entities such as fixed assets, employees, cash, etc. The conventional enterprise has no framework for disciplined capital management.< [more...]

There has never been a workable cost-accounting method

Knowing and managing costs has been a major management concern, since the beginning of business. We have faced two major problems in managing costs:

• We do not have one entity that generates costs, and includes all costs incurred
• We do not have one entity that meaningfully absorbs costs for good management

One entity must generate all costs

Many methods have been contrived for costing and cost accounting. The methods try to gather “known” costs for separate entities like employees, fixed assets, cash, and supplies. The other capital utilized has never been defined and produces “unknown costs” or is labeled “intangible assets”. All costs come from consumption of tangible and intangible capital. This is performance and all capital utilized must be organized and defined as one entity “performance solution”.

One entity must absorb all costs

Costing methods charge costs against entities like center, station, activity, and product. Product is the only entity actually produced by the cost. However, many other outputs also are produced by costs. Products and other outputs produced by costs are part of one entity “result”. The result is the entity that contains the value created by the costs and is the only entity that can absorb costs to show the value added by performance.

Performance Solutions generate costs and Results absorb costs against Result value to manage value-added

The only way to know all of our costs and to charge costs properly to manage value added is Result-performance Costing. By establishing result value-quality chains, we can know the cost and value of each result in the chain leading to the final product or service result that leaves the enterprise to produce our revenue and profit results. This is explained in the article “Know Unknown Costs through Result-performance Costing” in the 21^st Century Management magazine. Result-performance Management (R-pM) organizes the business for 21^st century management and to employ Result-performance Costing.

21^st Century Management eliminates 20^th century problems

Result-performance Management (R-pM) eliminates the costing problem and other costly 20^th century problems. Slash costs, simplify business management, and boost your competitive advantage through R-pM, the conventional method for 21^st century management.

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. .

Many posts at the Business Change Forum discuss the problems with 20^th century accounting and the need for professional records management for 21st Century Management. Rule No. 4 of the Ten Rules for 21 Century Management is: Keep records on the full cycle of cost and value in operations and development.

Today’s enterprise faces many obstacles to professional record capital management provided by R-pM. Financial accounting is often seen as enterprise records management, but maintains a professional view of what it will record, and acts as an administrative function, rather than professional records management. Financial accounting does not record the business, but accounts against a chart of accounts overlaid on the business.

This subject is discussed in an article in the 21^st Century Management Magazine, Broaden Financial Accounting to provide Professional Records Management. The article shows how R-pM provides a unique opportunity for the accounting profession to expand to professional records management. Professional facility records management maintains financial and non-financial facility records of the actual business, and provides information capital solutions from records, where needed to produce results at all levels of business management.

This article is important for the future of professional business, financial, cost, or management accountants and anyone in the accounting, auditing, and records management profession. If you are in the industry, read the article carefully and forward it your fellow professionals, for their views.

21^st Century Management eliminates 20^th century problems

Result-performance Management (R-pM) eliminates the records management problem and other costly 20^th century problems. Slash costs, simplify business management, and boost competitive advantage through R-pM, the conventional method for 21^st Century Management.

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..

Corporate Governance is one of the top 10 management problems in the 20^th century enterprise! How much will US corporations spend conforming to the Sarbanes-Oxley Act of 2002, before we realize that the whole approach to corporate governance is wrong? According to several estimates, the shareholder value diverted to modifying processes and information systems to comply with new reporting rules will exceed US$30 billion in 2007.

Corporations are governed by enforcing rules, because we do not manage the corporate business

Corporations measure and report contrived overlaid structures, and not the actual business. Corporations can only govern by enforcing policies and rules, instead of governing approved strategies and plans. As we said in our article The Corporate Governance Problem and Solution, we always address the symptoms from the governance side, instead of solving the problem from the corporate side.

We need to govern strategic value creation by managing the corporate business with R-pM

Good corporate governance requires that we clear away contrived overlays that complicate management, and directly organize, manage, and report the business to simplify management and governance. The means to do this is Result-performance Management (R-pM), as explained further in the article “Seeking Good Corporate Governance by strengthening Bad Governance“.

Corporate Governance is a small part of the big corporate management problem

When we look at the corporate side, we do not just have a corporate governance problem. We have a big corporate management problem, because we do not organize and manage the business of the corporation. The business is hidden by overlaid organization, strategy, business process, account, performance management, information system, and other structures that manage contrived entities, like department, object, activity, and account rather than the business. [more...]