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

Accounting today does not maintain records of the actual business

The business of the enterprise is defined as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. For some time, there has been a need for professional records management to account for the actual business and 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 of the actual business 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) knowledge and procedures 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 of the business 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, capital solutions, 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 capital 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.

Cost accounting methods are contrived, separate from financial accounting, 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 that have nothing to do with the business. 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.

We must organize the business to enable 21^st century records management

These problems are eliminated by organizing the business for 21^st century management.

The actual business is organized through the only three components directly involved:

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

The business invests in capital, which must be utilized as specific solutions by the business to determine capital worth and the real return on capital investments. The business consumes capital by utilizing capital solutions, which generates costs. The business utilizes capital solutions in performance to produce results, which creates value. The return on investment and the worth of capital is a function of result value created and performance costs incurred in utilizing the capital. Yet none of this is captured in 20^th century accounting.

21^st century business management 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. The strategic business is planned in strategic results to be produced and capital solutions needed at a strategic horizon. The current to strategic business is planned through period by period result goals that guide capital solution development and strategic value creation.

The actual business is simplified 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.

Capital is categorized for professional management as business, human, facility, and management capital. Each category is sub-divided into class as readiness capital to be prepared to produce the results assigned to a business unit, production capital to produce specific individual results, and information capital to deliver information and to document results and performance. Information capital is organized 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. Managing the business simplifies records management, but also requires professionally produced financial and non-financial records solutions on the complete business cycle.

Business transactions are generated each time a volume of full or partial results are produced and recorded. Transactions by performance domain (result-capital solution) record performance costs and the attributed result value created. Transaction by result record the result volume and result value created, full performance costs for all solutions, and result value-added over performance costs. Transactions by  capital solution record the reduction in the investment balance through performance costs incurred and result value created to build return on investment to date and to assess future capital worth.

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. 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. 21^st century business management 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

21^st century business management provides a new foundation and significant competitive advantage for the 21^st century enterprise. 21^st century business management 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 business management. Accounting has two choices:

1. View 21^st century business management as a threat, dig in to protect the legacy, and continue to be the problem
2. Recognize 21^st century business management 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.

21^st century business management provides a new view of the enterprise business and the professional record manager’s role. Accountants can begin by learning the business 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.

21^st century business management eliminates the 20^th century accounting problem

Once enterprise management and corporate shareholders recognize the simplicity of 21^st century business management 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.

Result-performance Management (R-pM) provides the knowledge for actual business management

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 20^th 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 21^st century management conventions, definitions, and standards. Management consultants who base 21^st 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 at result-performance-management.com.

The Solution to the Economic Crisis is explained in free downloads

Three free white papers explain the dead-end 20^th 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 20^th 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.