20th century management accounts against a chart of accounts, not the business
Another major problem of 20th century enterprise management is generally-accepted accounting structures and principles. Since the business is not managed, the business cannot be recorded or accounted for. Instead, a chart of accounts is laid over the business to account for income and expenditures and the worth of known assets. 20th century accounting records the cash generated and spent by the business, rather than recording the development and utilization of capital and the economic output results produced by the business.
Well known financial management and accounting problems remain unsolved today
The financial management and accounting profession has never solved well-known problems, such as intangible assets, unknown costs of specific investments in the business, unknown investment balance to be amortized over the life of the solution, unknown current worth of investments in the business, unknown reduction in solution worth due to deterioration of obsolescence, unknown performance costs incurred by the reduction of solution worth in consumption or utilization, unknown return on specific investments, unknown value created in the business, unknown value-added to results across the business and up the business, and unknown non-financial data which must be integrated with financial data for complete and meaningful management information. Net worth reported generally is disregarded as inaccurate.
A fixed chart of accounts normally is contrived by accountants with the objective to follow principles, rather than to accurately record and report the actual business. Sometimes account charts are contrived to deceive, rather than inform. Journal entries are generated by enterprise activity, but do not record the actual business. Entries are recorded against contrived entities like center, object, and activity that have nothing to do with the business. Cost accounting is separate and does not record real and full costs. Contrived numbers called costs are recorded against a contrived activity, process, or other structure. Most actual business data is never recorded and actual business information is never reported for corporate management and good governance. Auditing checks that rules are followed, rather than assessing the operations, management, and compliance of the actual business.
Financial statements do not report the business and often mislead management
Board members and managers of many corporations that suffered large losses in the economic crisis and government regulators responsible blamed unreliable accounts and incomplete and inaccurate financial statements that do not tell management and regulators what they need to know about the business. Financial institutions cannot manage “asset value”, because the worth of their capital is not managed or accounted for. Corporations are failing because financial statements and consolidation provides misleading information on the various units that comprise the corporation. Since the focus is on financial information, much non-financial business information is not captured, consolidated with financial information, or reported to management. Government regulators do not receive accurate and adequate information needed to regulate corporations. Shareholders and investors do not receive the information to understand the true business situation and make informed investment decisions.
21st century business management accounts for the actual business
21st century business management accounts for the business directly, through 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 capital 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 actual business decisions made.
The 21st century account structure is the business itself
The business is defined as “investments in capital as solutions of worth utilized for cost and effectiveness of performance to produce value and quality in results”. The business structure is business organization capital that is professionally maintained to show all economic output results required, all investments made in the business as specific capital solutions, and the implementation of of solutions with business rules to produce specific results. Financial and non-financial business transactions are generated each time a volume of full or partial results is produced to account for the actual business.
Business transactions and journal entries are recorded for each capital solution utilized to produce each result. All costs are captured and result value-added is recorded and managed across the business. All capital solutions are managed as assets of positive worth and liabilities of negative worth, giving business net worth. Financial statements show the accurate status of the business. Facility records management keeps financial and non-financial details of performance, results produced, and capital solutions utilized to provide facility record solutions to management.
The business structure organizes results of value to manage revenues and income, organizes capital solutions to manage solutions of positive capital worth as assets and solutions of negative capital worth as liabilities; and organizes capital solutions utilized to produce specific results to generate business transactions for every time a volume of full or partial results is completed. The business structure provides the only valid business recording and account structure, and is not controlled by accountants. It is professionally-maintained as a business organization capital solution to represent the actual business accurately. Subsidiary enterprise business structures are similar solutions for projects, programs, campaigns, and other work in progress that produce a “completed work” enterprise result.
Facility records maintain all value-created, expenditures, costs incurred, solution investment balances, worth, return, and business statistics
Accounts are maintained by professional facility records management for full financial, statistical, and qualitative records on the complete business. Results, capital solutions, and performance can be managed by a general ledger system with account relationship capabilities. Results are income accounts, capital solutions are capital accounts, and performance domains are journal entry transaction accounts. Normal accounting continues until superseded by proven and accepted 21st century business accounting.
As the diagram indicates, business records can be presented on results and performance for performance costs or any other measures recorded. Traditional income statements, balance sheets, and financial reports can be presented. Today’s responsibility centers are represented by result unit and manager solutions implemented to produce the result at each level, objects of expenditures are represented by the capital solution type, and activities are represented in the performance of the solution to produce the result along a result chain or as part of a result set. The balance sheet reports full capital worth and accurate business net worth.
Professional facility records management keeps records against the results of value produced, specific capital solutions of worth invested, and the performance of a specific capital solution to produce a specific result. Records are kept on actual investments in capital solutions that must be planned, acquired, and developed, project costs incurred to acquire, develop, and implement solutions, actual capital solutions implemented to know all investment costs to be amortized, the planned and actual worth of capital solutions invested in and utilized, and decline in solution worth as solutions deteriorate or become outdated.
Professional facility records management records the value of each result within total business or final customer result value, the consumption and utilization of capital in costs to produce each result, the total performance costs from the utilization of all solutions to produce the result, the value-added to each result in value less total performance costs, the value added to results from performance across the business, the value-added to results up the business to record higher-level results produced by a chain or set of lower-level results, the strategic result value planned for the business, the value goals that must be achieved each period to create strategic value, the period actual against goals, and other financial data.
Performance costs incurred by the decline in solution worth also reduce the solution unamortized balance and provide cost payback for the return on investment. Positive or negative result value-added also is recorded back against the solution to update the actual gain or loss for the return on investment. If result value-added over a period is negative, the solutions utilized are assessed for current capital worth in the expected result value attributed for utilization or disposal over the remaining useful life. Records are kept as well on the non-financial data needed in the capacity, qualifications, reliability, causes, and potential of capital; the capital utilization, effectiveness, uncertainty, problems, and expectations of performance; and the volume, quality, risks, symptoms, and goals for results.
Accurate financial, cost, capital, and statistical accounting of the actual business is the responsibility of professional records management
Accounting is incorporated in professional facility records management to provide facility records solutions on the current financial and non-financial status of the business. The current and strategic business structures, against which the business is recorded, are separately managed as business organization and management strategy solutions by appropriate professionals. All performance costs, value, worth, investment amounts and returns, and non-financial information are recorded against the proper business data entities. Actual business management enables new 21st century management conventions, definitions, and standards.
The accounting profession can upgrade accounting to professional records management and employ new 21st century records management principles. Management receives business management information to make decisions and manage business progress and change. Corporations can consolidate all corporate businesses into the corporation business. Auditors can upgrade their certifications to ensure that the actual business is presented properly, that the business complies with laws and regulations, and that malpractices are prevented. Actual business information can be reported to governments for informed business and financial institution regulation, and for informed management of markets, financial utilization, industries, and economies. Shareholders and investors in public companies have the information to understand actual business status against plans and make informed investment decisions
Result-performance Management (R-pM) provides the knowledge and procedures for actual business management and reporting
Result-performance Management (R-pM) is the only source of knowledge and expertise on how to manage the actual 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. Business management knowledge and the Business Management Toolkit are available and supported today 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
- A Government Business Management Program to Answer the Economic Crisis outlines a government program to encourage business management, stimulate the economy, restore confidence, organize businesses to flourish in the recovery, and manage economic cycles to prevent future crisis
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.
