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Volume 3: The need for detail

Accountancy, being able to account for, accountability and financial accounts all go hand-in-hand.

This is why business leadership and the understanding of the accounting side of the business are so important to merge.

There is always a risk of rushing into something without due planning.  We introduced the planning part of accounting in the previous blog post where mention was made of the need for detail.  We are not ready to finalize the design of the Chart of Accounts before we see the value of detail.

Please work through the cases below where I have attempted to promote why detail is critical in accounting.

  1. The loss of detail through the reporting of an average – imagine a learning environment where they only publish a class average or you receive a personal report card showing your overall percentage only.
  2. The loss of detail when you have boxes open for “General” – here imagine a cash business that has a multitude of products but all sales are reported as cash sales as opposed to having a report showing the extent of sales per product.
  3. The loss of detail for not opening a new box for everything new – when a new product is launched it would be handy to monitor its performance.  This ability to focus specific attention to the new product’s performance would be lost if sales of it were added in a total of existing product sales.  The same applies for new sales people, new profit centres, new branches etc.
  4. The inability to extract detailed reports when the detail does not exist – a longer term impact of not capturing detail is the inability to, at a later stage, extract a detailed report due to the lack of data.  If I only capture weekly sales as an example, I will never be able to extract a report showing sales per selected days of the week.
  5. The inability of being able to compare “apples with apples” without detail – imagine running two vehicles in your family – if you monitor fuel usage and kilometres travelled per vehicle you are able to compare the fuel consumption of the two vehicles.  Without the individual detail it would not be possible to do.

Returning to the ability to account. All businesses leaders need their team members to perform but few give them the context in which they need to perform.  In athletics high jumpers have the height of the bar and sprinters have distance and time.  In football it is easy to tell the overall result from the scoreboard, but in order to win repeatedly, certain players might benefit from being held individually accountable for specific performance measures.  Take a defender, where tackles made versus tackles missed is key, an attacking player can be better held accountable for shots taken on and off target, and a midfielder for successful passes to fellow team members versus the times they give the ball away to the opposition.  In a game like netball the same principles will apply.  By honing in on these details, coaches will be better equipped to know what specific skills need to be addressed.

Detail is your friend – when planning your accounting system take a detailed-based approach.  A separate box for everything worth managing.  A separate box for everything that a team member will be accountable for.  I remember when I started out in accounting – we always used to see one account for “Lights and Water” in the Income Statement – with the developments in the area of solar energy and the current severe restrictions on water usage, it would be far more beneficial to separate them so as to set goals, manage and have accountability for both.

In the next issue of this blog, I will attempt to help anyone who has had trouble wrapping their heads around the double entry system.

 

By Louis Gerke

Development FacilitatorThe Ripple Effect

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