abolish accounting

Dennis graciously asked me to do a guest post at his place.

Accman's tagline is "Dennis Howlett on innovation for professional accountants" - not being shy, what better theme than "dump accounting as we know it" could I choose when fishing for some slap-abouts from the accounting professionals?

Go here for the original discussion - abolish accounting.

[Here's the text for the archives as Dennis plows forward fast :)]

Accounting is supposed to be the "glass cockpit" of business.

Oops, nope, it tries but is not.

It should be, but it cannot.

The throttle and pedals and flaps and engines and gauges in the plane are all aspects of the same issue so they work seamlessly together. Without instant engine response and gauge feedback when throttling I would stall and crash.

In business those are separate - throttle (orders), engine (work) and gauge (accounting) - comes in different packages. We're saved from crashing by inertia, but we're not saved from inefficiency.

In the aircraft a gauge is linked to one engine, no doubt, no reconciliation. In business you have masses of reports and documents that represents one single object - order sheet, invoice, shipping papers, production reports, sales reports, support reports - no end to error sources and checks, balances and reconciliation are required.

In the aircraft you're allowed to add any kind of sensor to any part to give you any type of measure. In business the sensors are pre-set and regulated, they're called accounts. That freezes any development of the measurement methods. Actually it froze it ages ago. 

Two steps backward please, rethink and start over again.

• Order, action and feedback must be one. One single system,
• The real world object is the thing of interest, represent that with one single data-object that captures all that happens to it.
• Keep all data in raw form and add logic when needed.
• No more pre-set accounts, abolish accounting (required GAAP reports can be produced out of sight deep down in the basement for the government accounting trolls) and develop Your Own Measurement Methods.

Here's a suggestion:

Imagine that a widget procured by your firm is represented by a widget-data-object and that the widget-data-object is punted from a procurer to supplier to the shipper to the chap on the dock. The widget-data-object presenting work orders and input fields in each step - "Hi, I'm your blue widget with serial number 2346 just arrived from supplier X, please move me to the warehouse. When you're done with it please note here where you put me and hit "completed"." The widget-data-object not only supplies the work order and information needed, but also captures what happens to the real widget in real time.

The system would know at all times where the widget is, who owns it at any time, it's value, colour and serial number. Slap on a "report template" that sucks out the data and applies some rules to them and you have the gauges in the plane cockpit. No more reporting errors, no more reconciliation, any kind of report you can imagine today or tomorrow. Real time flying with your own dynamic "business glass cockpit".

Then perhaps accounting could evolve from it's ledger past and start to represent reality as it is, or how you see it.

At least the "department of input & reconciliation" would be redundant.

Comments

[Duncan Drennan]

I left this comment on his blog
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I've been reading Sig's blog for a short while now, and really buy into his concepts. As I read this though, there is one thing which stuck me, which is common to ALL business systems and processes, and niggles away at me the whole time.

Everything runs on people.

Every time the blue widget moves from warehouse to warehouse that information has to be captured somehow. What if the underlying process - the person - fails to capture the info? It is common to all processes. How can data capture become a natural process?