Dickeson–Making Relevant Data Decisions
Something has has been troubling some accountants and printing software suppliers whom I speak to from time to time: They note that printers often produce reports—information—from their computers at dazzling speeds, but then they don’t use the data to make decisions and take action.
“Why do companies pay big bucks for these data systems and then seem to ignore results that mandate remedial action?” is a question many ask. “We’re giving them what they asked for, aren’t we? So why don’t they use it?”
Yes, these systems are providing financial reports, balance sheets, income statements and cash flow analysis—all based on a system developed by the merchants of Florence and Genoa shortly before Columbus sailed for America. It provides for double entries into journals translated into general ledger books.
Debits are assets and credits are for ownership of the assets. It’s worked for more than 500 years. Don’t people understand this?
And now we even give ’em the Florentine reports at high speed from computers, don’t we? Well…maybe not so high speed. Say two to three weeks after the close of the month or quarter.
Is that really any faster than we did it when Bob Cratchit, in Dickens’ time, was standing at a high table with quill and sandbox? Are the figures any more accurate? The numbers on the reports are lined up in a column alongside the budgets with variances of actual from planned, aren’t they? We can see where we’ve gone astray.
So why don’t we take action to correct?
When World War I ended, Alfred Sloan realized that the system that worked for tracing assets and ownership didn’t help make decisions for mass-produced automobiles. “Cost accounting” was developed by Will Durant and others. It wasn’t a double-entry system. There was no general ledger or trial balance to provide validation for the numbers, but it satisfied the need for some idea of how much an automobile cost.