Scrooge Manning the Books --Dickeson
We must have decision support information by 8 a.m. every Monday morning following the close of a week, not two weeks following the close of some moon phase. Put the week’s numbers in the context of a rolling quarter of 13 weeks.
Those of us involved in management of printing companies have known for years that Budgeted Hourly Rates were misleading nonsense—not usable for current predictions and decisions. No surprise at all that modern scholars and writers no longer commend cost accounting as a management decision support.
Scandals have now alerted us to reassess the adequacy of the Scrooge Graphics Accounting. The current and continuing rash of accounting shenanigans are of concern to stockholders, institutional financiers, stock brokerages and taxing authorities primarily where equity valuations are an issue.
Yes, we’re outraged and sickened by the falsities and deceptions practiced. Thousands have lost their jobs and thousands more are becoming frightened as their savings vanish. But we’ve known since the year 1350 that the zero balance general ledger system is an equity valuation tool—a fiduciary model not intended for operating management guidance. It’s a flawed valuation system and useless for operating decision support.
What we want is a weekly statistical model. Reports within a few minutes after the close of a week are what we seek. We need currency, not archeology. Data must be in a context that gives it relevance and meaning. This is why we urge using the rolling 13-week report format where the oldest week is dropped and the newest added in each weekly report. In this format we’re always looking at the most current week in the context of a quarter-year.
You’re right. Bob Cratchitt wouldn’t have time to adjust depreciation and diddle with work-in-process and raw inventory values for closing and opening entries for reports within minutes after the close of a weekly period. There wouldn’t be time to hold sales open even an hour or move some expenses into inventory. Do you care? I don’t.