Eliminate 20^th Century Accounting Problems through 21^st Century Records Management

For some time, there has been a need for professional records management to manage the records capital of the enterprise. This has provided the opportunity for the accounting profession to expand their outlook to professional records management. But, to this day, the main barrier to 21^st century records management is 20^th century accounting. Now many enterprises are adding records management functions and implementing records management systems. This compounds the problem with duplicated functions, systems, and information sets. The problem must be solved as part of solving the overall 20^th century accounting and management problems by using Result-performance Management (R-pM) to organize the business for 21^st Century Management.

Need for professional records management

Records capital is the recording and documentation of the strategic, planned, and actual business through the capital utilized by the business, economic outputs or results produced by the business, and performance in the utilization of capital to produce results. Professional facility records management goes beyond accounting to maintain financial records on the full business cycle, non-financial records, and documentation of results and performance. Professional records management also must provide extensive capital solutions, derived from records, to be utilized in performance to produce other business results.

Records on results include all the revenue producing output like payments, sales, contracts, proposals, products, services, design, research, conceptualization, etc. Records on results include all capital support output like business change, personal capability development, knowledge creation, asset operation and maintenance, financial and other supply acquisition and utilization, record maintenance, strategy and policy development, intelligence collection, etc. Records on results include all management over time for operational improvement, capital development, interaction with others, and strategic value creation.

Records must be kept on monetary, statistical, qualitative, document, and imaged information produced from performance. Records must be kept for modern innovations like emails, image and video files, file transmissions, and Internet postings and downloads related to the business. The objective is to produce record-based performance solutions to enable management and others in the enterprise to leverage records to produce their results.

With today’s technology, the solutions must be up-to-the-minute and accurate records of the actual business. We should be able to take snapshots of the records to show complete and accurate business reality at any point in time. Records should be the comprehensive, up-to-the-minute, accurate, and official.

The generally-accepted accounting problems

The need for professional records management has existed since the beginning of business. However, the need has never been fulfilled in the 20^th century enterprise. The main reason is accounting. Accounting started out as bookkeeping to keep financial records on cash, which are a sub-set of enterprise financial record capital. Accounting got built up to be synonymous with record-keeping. But accounting restricts record-keeping to financial records on actual and accrued cash receipts and expenditures. So, instead of being managed as enterprise capital to produce benefit, records are spotty and scattered with various units and individuals.

Rather than accounting for business results, capital, and performance, a contrived chart of accounts is laid over the business, so most records are kept on entities that are not the business. Accounting keeps financial records on only a part of the business cycle from the point that money comes into the point that money goes out. This is the routine part that is easy to record, but involves enormous expenditures. The other part of the business cycle is the dark side of accounting, where few financial records are kept. The dark side contains the value of economic input results to the business from expenditure and investments, the transformation of input results to economic output results and the value-added to specific results to produce revenue results.

The dark side of accounting also contains the creation and improvement of solutions to be utilized in performance and the worth of these specific solutions. The dark side also contains the utilization of solutions in performance to incur a cost to produce a volume of a specific result, which generates total result costs against result value that gives the value-added by the performance. Professional records management must include financial records from the dark side of accounting to record the full business cycle.

Methods are contrived to account for some known costs, but the costs have little meaning and usually are charged to the wrong things, such as activities or centers. The 20^th century approach to financial records management produces many unsolvable problems, such as intangible assets, unknown costs, unrecorded value, unmanaged capital investments and returns, distorted capital worth, incomplete and inaccurate management information, and ill-informed corporate governance.

R-pM, the 21^st Century Records Management solution

These problems are eliminated by Result-Performance Management (R-pM) a new breakthrough to organize the business for 21^st Century Management.

R-pM defines the business as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. R-pM organizes the business through the only three components directly involved:

• Results: Economic outputs of value produced by business performance
• Capital: Investments in capital of worth available to be deployed as specific solutions to produce specific results
• Performance: Capital solutions deployed with rules and utilized in performance to incur costs to produce a specific result in a performance domain

The business consumes capital by utilizing performance solutions, which generates costs. The business utilizes performance solutions to produce results, which creates value. The worth of capital is a function of result value created and performance costs. Yet none of this is captured in 20^th century accounting.

R-pM manages the current business, through a business structure that records capital solutions of worth utilized or consumed in performance costs to produce economic output in result value. R-pM plans the strategic business in strategic results to be produced and capital solutions needed at a strategic horizon. R-pM plans the current to strategic business through period by period result goals that guide capital solution development and strategic value creation.

R-pM simplifies the business down to six entities: 1) results produced; 2) capital solutions utilized; 3) performance domains in the utilization of a specific solution to produce a result; 4) time periods for planning and recording; 5) enterprises in superior or subordinate enterprises, suppliers that provide input results, solution providers that produce enterprise results, and customers for final results that are used as input results or implemented as capital solutions; plus 6) business descriptors that describe the attributes of results, capital, and enterprises. Capital development projects, customer service projects, campaigns, etc are managed as sub-enterprises with a business structure to produce a particular enterprise result or a set of enterprise results.

R-pM categorizes capital for professional management as business, human, facility, and management capital. R-pM sub-divides each category into class as readiness capital to be prepared to produce the first result, production capital to produce results, and information capital to deliver information and to document results and performance. R-pM organizes information capital for utilization as business data, human knowledge, facility records, and management intelligence in one integrated Business Information Base. The Business Information Base is integrated by referencing all information related to the business to one of the six business entities. A subset of the Business Information Base are the facility records that maintain one set of complete, consistent, and accurate business records for all strategic, planned, and actual business performance utilizing capital to produce results. R-pM simplifies records management, but also requires professionally produced financial and non-financial records solutions on the complete business cycle.

Records are both Facility Capital to be managed and Information Capital to be integrated and utilized

To summarize, records are facility capital to apply record-keeping expertise to maintain records and provide record solutions. Facility records are information capital to be integrated with business data, human knowledge, and management intelligence, and then to be utilized as information solutions to produce results. Facility record solutions are utilized both to produce results and also to document and record results produced and performance utilized.

Records are managed through Capital Management results

Professional Records Management manages facility records capital by producing specific records management results. With R-pM, facility records management has such responsibilities as:

• Maintain the up-to-date and official enterprise records including documents, transaction records, computer records, imaged records, and archives
• Maintain records on all results produced historically and into the future for financial and all other needed quantitative and qualitative measures
• Maintain records on all capital utilized as solutions, including current “intangible assets” and record all capital development and worth
• Maintain records on performance in the costs and effectiveness of capital utilized against the value and quality of the volume of results produced and record result value-added
• Record the reality of the complete business cycle including financial measures for the value received from expenditures, subsequent value-added, and value provided for revenues received
• Keep accurate records on the complete business cycle to know all performance costs, performance effectiveness, result volumes, result quality, result values, result value-added, tangible and intangible assets of positive capital worth, liabilities as specific solutions of negative capital worth, and accurate enterprise business net worth
• Record, image, and archive all record capital of worth to document results and performance including internal design and documentation; intellectual property; customer, supplier, and solution provider interactions and documents; related emails, Internet downloads, and file transmissions, and external reporting records
• Provide records for management analysis to derive management intelligence solutions
• Provide record-based solutions needed to produce other enterprise results

Records management results produce accurate records solutions on the status of business results, capital, and performance needed by the management and the board to produce their results, by result managers for lower-level results, and by external entities authorized know about the enterprise business. R-pM enables full recording of the business cycle, comprehensive cost and value records, assessed capital worth, a transparent and accurate management view of all measures involved in the business, and fully informed corporate governance to ensure strategic value creation.

Professional Records Management records all financial and non-financial measures

Professional records management records all capital of worth and results of value to provide management solutions for complete financial management and control. Accounting cash and accrual records are only a part of complete financial records. Financial records are a sub-set within facility records. Professional records management also maintains non-financial records for complete facility records management.

The choice for accounting

R-pM provides a new foundation and significant competitive advantage for the 21^st century enterprise. R-pM provides one-time opportunity for the accounting profession to transform to professional records management.

It is up to the accounting profession to decide its role in 21^st century management. Accounting has two choices:

1. View R-pM as a threat, dig in to protect the legacy, and continue to be the problem
2. Recognize R-pM as an opportunity to expand the profession, change with the times to eliminate 20^th century accounting, develop new record-keeping principles to accurately record the actual business, develop 21^st century professional records management, and be part of the solution.

R-pM provides a new view of the enterprise and the professional record manager’s role. Accountants can begin by learning R-pM and thinking of ways to help their management by keeping informative financial and non-financial records, and assessing the complete need for professional records management.

R-pM eliminates the 20^th century accounting problem

Once enterprise management and corporate shareholders recognize the simplicity of R-pM for one set of records by time period on results produced, capital solutions utilized, performance producing results, business descriptors, and enterprises in subordinate projects, suppliers who provide input results, providers who provide outsourced or procured solutions, and customers who provide the value to final results, there will be no return to 20^th century accounting. Learn more about R-pM and download The R-pM Toolkit for complete details at result-performance-management.com.