Street Smart Business Intelligence for Management..
Street Smart Business Intelligence for Management Going Beyond the Numbers
Peter Ho is a chartered accountant, senior facilitator for learn accounting fast for the last 18 years. Peter, could you just give us a bit of an idea on your thoughts in business in today’s environment?
Peter: So what is the problem in today’s environment? Why are we having problems?
Lack of CASH. Cash is blood. Cash is power.
Look at all the company that are doing well, they have no problems with cash. Look at all the company which are not doing so well, we have General Motors, the government is pumping in money to them and yet they go bankrupt.
Very important, Cash is power. No cash, No power.
Cash is the ability to perform, if you don’t have cash, you have no ability to perform.
The Profit and Loss account shows you how well you are going to perform. But if you want to continue to perform in the future you need a sustainable cash flow.
Not only sustainable profit but sustainable cash flow.
Because although you are measured by how much profit you make, you run the business by what? CASH.
Where did Enron go? Enron was making up numbers for a Profit and Loss Account. When there’s no more cash it just died.
Look at the financial crisis – the ancient financial crisis, the current financial crisis, there is no sustainable cash flow. That is the single most important thing.
Colin: Thanks very much Peter. What do you mean by “Going Beyond the Numbers”? Just briefly give us a couple of tips on going beyond the numbers.
Peter: If you get an accountant to run the business and he is only driven by the numbers, what happens to the company? Within the company, its not just the numbers that drive the company. You have people, you have customers, you need to go beyond the numbers to see what actually is happening.
Go beyond the numbers and find out what actually is happening.
The numbers sometimes comes out and say you need to invest. You can invest! This particular investment is good but if you go into this investment, you may cause environmental damages. That costs you, the cost to the country could be very much more. Sometimes the numbers only give you quantitative input, you need to go into the non-quantitative.
That’s what I mean by going beyond the numbers.
Take for example if you buy a company, The Balance Sheet says you have Four Cars (Mercedes Benz). You look at it, very nice! When I say you need to go to going beyond the numbers, you go check the cars. You look at the cars; 2 of the cars have only 2 wheels, the other 2 has no engines. That’s what I mean by going beyond the numbers. Go and check the numbers by saying one thing.
Go beyond the numbers and find out what actually is happening.
So there are two things we need to do. Look at the qualitative aspect of the business and look at the quantitative. When I say going beyond the numbers, look at the qualitative aspect of the business.
