Lies, Damned Lies, and Cost Accounting
Business leaders rely on accounting data such as profit and calculated costs as a guide to whether they are making money. Should they?
Accounting was designed to report financial performance not model cash flow. Accruals can disconnect cash flow from the timing and extent to which it occurs. Statements of cash flow do not provide insight into what was bought and how efficiently it was used. Costs and profits are not absolute, they change based on the model you use to calculate them. To manage cash, you must manage what you buy and how effectively you use it. The largest expenditure for most companies is capacity; space, labor, materials, equipment, and technology. Unless you model and manage capacity effectively, you will not achieve the cash flow results you seek.
This book introduces capacity management, describes cash flow dynamics, and offers ideas about how to manage both. After reading it, you be able to see, understand, and manage cash flow as never before.
Strategic Cost Transformation
Your product costs $2.86 to make. What does the number tell you about your operations, how effectively they were run, demand, or how much money you spent on capacity? Nothing. Shouldn't you know?
Accounting information creates a limited picture of operations and true cash performance. Strategic Cost Transformation offers a new framework, business domain management, which creates a comprehensive picture of your organization for improved cash based decision-making.
Project Profitability
Consultants and internal project teams often make substantial claims about the savings opportunities resulting from their projects. Most of the time, these claims do not come true. Project Profitability explains why these opportunities are not realized and offers a framework that will guarantee your teams identify projects that align with your strategy, calculate cash savings appropriately, and realize these cash savings upon implementation.
Customers of consulting organizations can use this book to keep their consultants honest when savings are promised. Consulting organizations can use this book to help document the value their solutions bring, how much of that value can be realized, and what's necessary to achieve it.
If you are a consultant, you do not want to risk having your customer know the content of this book and challenge the value promise!
