Magazine article Management Today

Don't You Believe It ... Monthly Accounts Help You to Manage

Magazine article Management Today

Don't You Believe It ... Monthly Accounts Help You to Manage

Article excerpt

As the banking crisis deepens, you may be using your monthly management accounts as the basis for tough decisions. Beware. They hide more than they reveal.

Management accounts ignore commercial logic. It says 'marketing costs' on the spreadsheet, but is it really? Are salaries included, or are they on a different line with the other salaries? Even if you can see the true cost of marketing, where can you check the results that marketing produced? You can see total sales, but how much would have come in anyway from established customers?

They show meaningless averages. HR reports that employee satisfaction, on a scale of 1 to 5, averages 4. Great news. But you discover that behind the average lies a nucleus of malcontents reporting 1 or 2 - and they are the customer-facing ones. An HR director wouldn't make this mistake, but management accounts do, all the time. All they report is averages, so you never find out about dangerously unprofitable customers or products. …

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