Special Guests

Pierre Mévellec,

doctor in economics and in management sciences, university professor taught in Rennes and Nantes. He interrupted his career for 2 years to be an industrial management accountant.

In 1993 one of his articles received the first prize awarded by the FMAC. ABC call for a French approach. He has published many books and articles. You can find most of them on the Research Gate site. He was a consultant for large French firms as for public services.

Cost Systems: a renewed approach

"This dissertation, after having proposed a meta-model of cost systems, presents a calculating machine that applies regardless of the system chosen. The author's wish is that we no longer spend time on the computational part but that we concentrate on analyzing the relevance of cost systems."

The content is available in the file attached below

You can find this contribution also in the book "Cost systems: a renewed approach" by Pierre Mévellec previously published on https://www.researchgate.net" 

Given by the author and published on this website in 2020

Joseph F. EL-Ashkar

With over 35 years of applied accounting experience, Joseph is still passionate about his field of specialization. He has held senior positions of responsibility in accounting, financial control, and auditing.

During his career, he has traveled extensively and has been exposed to a variety of cultures and environments. He has also invested time in research and developed an advanced automated financial methodology, the Direct Method Cash Flow which provides real-time analysis for better decision-making.

The Cash Flow Management & Results

Background and Purpose

My objective is to propose an improvement, rather than a sweeping change, to the century-old, well-established double entry accounting convention to enhance our understanding of the information it generates. Although it is obvious that we should not attempt to bypass the traditional accounting equation, we should no longer limit ourselves to the traditional analysis of the results it generates.

During my thirty-eight-year career, as an accountant, auditor and management consultant for small and medium-size business entities, I evolved a methodology to help my clients, their investors and creditors, make better decisions through a stronger understanding of their financial situation and a true transparency of the results of their operations.

The Methodology

The conceptual framework of the proposed methodology consists of tracing each financial transaction, recorded in accordance with generally accepted accounting principles, through its economic life cycle. This is accomplished by synthesizing balance sheet account balances, with their related income statement transactions and their cash flow effect while maintaining the reference to the period (year) when a transaction was initiated.

The statement displays the nature and the source of the investments (self-financing or by means of other debts), and breaks down the results of operation into the following components:

• Unachieved Results

• Achieved Results

             o Available for Distribution

             o And/or Reinvested

The additional schedules provide further information about the flow of funds used in operation, such as:

1. Linking the funds to the year when transactions were initiated

2. Providing an accurate break down of the uses of funding sources, which I also refer to as Net Financing Position. This information is particularly critical for banks and other financial institutions providing credit to a business entity.

3. Providing the investors and other parties with the accurate status of usage (investment) of the funds in a business entity’s Capital Position.

The Beneficiaries

The statement and the related schedules provide a novel picture of the results of operations that was very useful to my clients, their investors and bankers in making business decisions.

1. Management and the Investors

The recent well-publicized bankruptcies of major corporations have confirmed that the backbone of any business entity and a key to its survival continues to be the flow of funds generated by almost all of its transactions.

The methodology that I propose will help both management and investors gleam an exact picture of the solvency of the business entity by providing a better understanding of its collections and disbursements and their effect on the results of its operations. The methodology will also provide the business entity’s Treasurer with tools to monitor the financial condition of the entity and an “early warning” for any deterioration in that condition.

This will lead to an accurate determination by management of achieved results and, consequently, of profits available for distribution. It also provides investors with a strong tool for monitoring the orientation of their investments.

2. Management and Financial Institutions

The concept of Net Financial Position that is produced by the methodology is a more precise and clear depiction of a business entity’s funding sources and their uses, regardless of the entity’s age and the complexity of its existing financing arrangements.

The schedules presenting the Net Financial Position are a powerful tool in the hands of banks and other financial institutions negotiating and structuring new loans or financing vehicles to business entities.

They provide an accurate basis for projecting the impact that the new financing would have on the financial situation of the business entity, and thus will help determine the credit risk of the entity and the most favorable repayment conditions. These schedules will also be critical tools for the financial institutions to monitor the entity’s performance under the financing agreements.

These tools are also useful to the business entity’s management in monitoring the entity’s Net Financial Position and in projecting its cash flow needs into the future.

3. Management and the Auditors

The accounting profession, worldwide, is currently working hard to ensure that its clients regard the assurance and attestation services they receive as providing added value to their decisionmaking processes. The auditors and their clients expect to accomplish this through an increased usefulness of the auditors’ analyses, reports and recommendations.

The statement and related schedules generated by the methodology that I propose provide a wealth of financial information that is ripe for in-depth analyses of a business entity’s results of operations, its solvency and Capital Position. The results could range from useful recommendations to decision-makers about resource allocations, to “red flags” to auditors for enhanced audit results.

In Conclusion

I have applied this methodology and the results have been conclusive and beneficial to management, investors, controllers and financial institutions. The methodology I suggest is easily applied through the use of available information technology either for on-line or subsequent gathering of the necessary data.

Finally, I wish to reiterate that my methodology intends to complement the existing accounting standards and processes by enhancing the understanding of the information they generate and making it more relevant for decision-making purposes.

Joseph F. EL-Ashkar

Email: jfashkar@hotmail.com

Given by the author and published on this website in 2020

Sonya M. Gonzalez – Financial Controller specializing in Cloud Computing and Financial Analytics

Distinguished leader with over 30 years of experience in Financial Applications and Reporting. Created and improved Financial processes using Financial Analytics and leading to increased quality and efficiency, while being consistently at or under budget and on time. Over the past 6-7 years have been heavily involved with Cloud Computing and Financial Analytics.

Email: contact@liftrinsights.com

Cloud Computing and Financial Data Analytics

Accountants have always used analytics to help business uncover valuable insight into organizational financials.

 This seems obvious, but with all the recent hype about advanced analytics, machine learning and artificial intelligence, it’s important to revisit our daily context. Analytics enable accountants to identify problem areas and create Standard Operating Procedures to overcome these problem areas. 

This is one of the basic principles of accounting that we all learn as we advance through the field of finance.

The profession of accounting is old, with records preserved in clay tablets going back over 7,000 years. Cloud computing, on the other hand, was invented in the 1990s and became an economic force starting about 15 years ago. Cloud computing is the ability to rent time on a network-based system of servers that allows us to store and process data over the internet.

Public cloud computing providers rent space on their servers to individual companies to process data, while private cloud resources are deployed within organizations or managed on their behalf. The dominant public cloud computing providers (simply called “public clouds”) in the world today are Amazon Web Services, Microsoft Azure, Google Cloud Platform and Alibaba Cloud.

Public cloud access allows businesses to move forward with new technology adoption without up-front CapEx investment. It also allows businesses to analyze more of their own operational data, which uncovers more complex operational patterns and operational risks. 

 Public cloud-based analysis is also enabling faster insights, to the point that real-time operational insight is becoming possible.

Better, deeper, faster operational insight enables financial professionals to make more solid business decisions moving forward, including reducing operational costs based on deeper understanding of operational fundamentals. 

For example, as a financial controller, I’ve used financial analytics to create KPI reporting to produce specific metrics that we’re able to track. As a result, over the past several years, this allowed us to improve to our business operations, which included better support for our customers in addition to streamlining some of our internal processes. 

In addition, we retained our customers at the same time we grew our revenue based on improved contract terms. And while we were doing all of the previous, we improved our customer satisfaction rating by 80%.

Data analytics continues to revolutionize the way we do business, and it is continually evolving as we learn more about what data can be tracked and how it can be beneficial to business owners.  Financial analytics provides different views of a company’s financial data and can assist -in gaining in-depth knowledge and allow them to improve their business performance.

As more financial professionals move into the data analytics field, we gain the ability to influence data collection and analytics, which affects all aspects of businesses. This virtuous cycle is a powerful tool for finance. The more finance gets involved with organizational data analytics, the more finance can participate in strategic business decisions.

Financial professionals are not alone in leveraging new data analytics technologies. Investment analysis is defined as the process of evaluating an investment for profitability and risk, and so investment firms are now focusing on the data analytics side of the public cloud.

Institutional investors are finding that analysis of public data about public clouds themselves can be used to corroborate public cloud component and supply chain vendor claims, as well as the competitive state of the public clouds themselves. 

 Data analytics about public clouds enables institutional investors to mitigate their own investment risk and to provide more solid advice to their customers.

In conclusion, the financial community – both professional accountants and institutional investors – must rely on data analytics to streamline business processes and make more strategic operational decisions using cloud computing technology.

Given by the author and published on this website in 2020

Gary Kapanowski

Certified Lean Six Sigma Master Black Belt and Certified ASQ Bronze Lean professional is cost accountant for Moeller Manufacturing, a leading aerospace part supplier, and Lean Six Sigma Master Black Belt Lecturer at Lawrence Technological University Professional Development Center

He is on the editorial board and contributing editor for the Journal of Cost Management

Gary E. Kapanowski

Cost Accountant; Export Compliance Officer

Moeller Aerospace

30100 Beck Road

Wixom, Michigan 48393

 http://www.moeller-aerospace.com

Telephone:  248-960-3999 Ext. 406 (direct)

How Finance Can Destroy Company Value

In his 1989 hit “Runnin’ Down a Dream,” Tom Petty sang: “Yeah runnin’ down a dream; that never would come to me; workin’ on a mystery, goin’ wherever it leads; runnin’ down a dream.”1

According to William Levinson, there is a divergence in corporate strategy from an operating and financial reporting point of view, which leads to misallocation of the resources utilized to produce decisionmaking information.2

When an organization is focused primarily on finance-based metrics, like bank covenants, compliance with IRS or SEC regulations, and other guidance for exporting goods or services outside the country, suboptimal performance is a guaranteed result.

This article will address why this occurs and how we can prevent this from happening in our organizations......

The full article is available in the file attached below

Given by the author and published on this website in 2019

Douglas T. Hicks CPA 

has been helping organizations realized the benefits of accurate and relevant managerial costing information for thirty-four years through his consulting projects, books, articles, courses and presentations. 

He’s a member of the Institute of Management Accountants and serves on the Advisory Board of its Center for Managerial Costing Quality (www.thecmcq.org).  You can learn more at his website: www.dthicksco.com.

The Navigator and the Management Accountant

Douglas T. Hicks, CPA

About two centuries ago there was a navigator who served on a ship that regularly sailed through dangerous waters.  It was this navigator’s job to make sure the captain always knew where the ship had been, where it was, and how to safely and efficiently move the ship from one point to another.  In the performance of his duties, the navigator relied on a set of sophisticated instruments.  Without the effective functioning of these instruments, it would be impossible for him to chart the safest and most efficient course for the ship to follow.

One day the navigator began to suspect that one of his most important instruments was calibrated incorrectly.  If his suspicions turned out to be correct, the navigational information he provided to the captain – information on which the captain based the decisions necessary to safely and efficiently direct the ship – was inaccurate.  After several days of reexamining the evidence and rethinking his conclusions, the navigator concluded that something was definitely wrong with the way his instruments were making their measurements. 

No one but the navigator had any inkling that there might be anything wrong with the ship’s navigation information.  He knew, of course, that he should immediately report the problem to the captain.  The captain was, however, a strict disciplinarian and was likely to blame him for not detecting the problem sooner.  He’d also demand that he either correct the problem or find another way to make the measurements more accurately.  Unfortunately, the navigator had little training in the theory of navigation – he had “picked up” his knowledge of navigation on the job while serving in other capacities on other ships – and was adept at its mechanics, but not the science that lie behind them.  He was afraid that this lack of knowledge would make him look foolish to the crew.  As a result, our navigator decided not to inform the captain. 

As a result of his decision, the navigator always made sure he slept near a lifeboat so that if his inaccurate navigational information led to a disaster, his chances of survival would be high. Unfortunately, faulty navigational information caused the ship hit a reef that the captain believed to be many miles away.  The ship was lost, the cargo was lost, and many sailors lost their lives.  Our navigator – always being in close proximity to the lifeboats – survived the sinking and later became navigator on another ship.

Two centuries later there was a management accountant who worked for a company in which there were hundreds of stakeholders – from investors who had put their savings at risk in the company to long-time employees who invested many years of their life in the firm.  It was the job of this management accountant to make sure the company knew how it had performed, its current financial position, and the likely consequences of decisions being considered by the company’s president.  In the performance of his duties, the management accountant relied on a costing system that was believed to be a true representation of the company’s economics.  Without the effective functioning of this costing system, it would be impossible for him to provide the president with the accurate and relevant cost information he needed to make economically sound business decisions.

One day the management accountant began to suspect that the costing system on which he based the decision support information he provided to the president was calibrated incorrectly – it was not based on a valid model of the company’s economics.  If his suspicions turned out to be correct, the decision costing information he provided to the president – information on which the president based the decisions necessary to direct the company toward its strategic objectives – was inaccurate.  After several days of reexamining the evidence and rethinking his conclusions, the management accountant concluded that something was definitely wrong with the way the company’s cost system was making its measurements. 

No one but the management accountant had any inkling that there might be anything wrong with the company’s decision costing information.  He knew, of course, that he should immediately report the problem to the president.  The president, however, had a no-nonsense management style and was likely to blame him for not detecting the problem sooner.  He’d also demand that he either correct the problem or find another way to make the measurements more accurately.  Unfortunately, the management accountant had little training in the theory of management accounting – he had taken one combined cost/management accounting course in college but accumulated most of his knowledge of management accounting on the job while serving in other capacities at other companies – and was adept at its mechanics, but not the science or craft that lie behind them.  He was afraid that this lack of knowledge would make him look foolish to the rest of the management team.  As a result, our management accountant decided not to inform the president. 

As a result of his decision, the management accountant made sure he kept his network up-to-date so that if his inaccurate management accounting information led to a disaster, his chances of landing another job would be high. Unfortunately, faulty management accounting information caused the president to make inappropriate pricing, operating, investment, and other decisions that led the company into bankruptcy.  The company went out of business, the owners lost their investment, creditors incurred financial losses, and many long-time, hard working employees lost their jobs.  The management accountant, however, easily found a job at another company.

            Unfortunately, most companies in operation today are forced to base their decisions on cost information generated by costing systems that do not represent the economic realities of their business and a vast majority of management accountants do not plan on doing anything about it.  Although supported by thirty-five years of my personal observations, this statement is not based solely on my personal observations.  The 2003 Survey of Best Accounting Practices Survey, conducted by Ernst & Young and the Institute of Management Accountants, revealed that 98% of the top financial executives surveyed believed that the cost information they supplied management to support their decisions was inaccurate.  It further revealed that 80% of those financial executives did not plan on doing anything about it.  An update of the survey conducted in 2012 revealed that the situation had not changed and may have even worsened.  And in 2019, an APICS/IMA survey of senior supply chain executives indicated that decision makers in the supply chain need their cost information to be more accurate and effective.  They site three problems: 1) an overreliance on external financial reporting systems, 2) the use of outdated cost models and 3) accounting and finance’s resistance to change.

            Personally, I find it hard to believe that the motives of most management accountants are anything like those of the navigator.  Those with years of management accounting experience cannot have been oblivious to the warnings that have filled professional publications for more than three decades; yet they refuse to recognize and correct the problem.  But if their motivation is not fear of humiliation, embarrassment, or loss of their position, what could be their reason for continuing to consciously provide their management with inaccurate and misleading information?

"The Navigator and the Management Accountant" is included in the book "I May Be Wrong, But I Doubt It: How Accounting Information Undermines Profitability" by D. T. Hicks

Given by the author and published on this website in 2019