Page 283 - Accounting Best Practices

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General Best Practices
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Robert S. Kaplan and David P. Norton have addressed this issue in their
landmark book, The Balanced Scorecard (Harvard Business School Press, 1996).
In it, they argue a strong case in favor of an entirely new method of reporting that
itemizes the key factors that impact company profitability. An example of such a
report is shown in Exhibit 13.6, where measurements are clustered into blocks,
each one concerned with a different aspect of key success factors: financial, cus-
tomer, internal business processes, and employee learning and growth. Kaplan
and Norton feel that these four areas must be closely managed as a whole in order
to attain truly exceptional levels of profitability.
Where does this leave a controller? This person is the one whom most of a
company relies on to issue reports regularly on company status, even though
those reports are only concerned with finances. Since reporting is already a part
of this person’s job, it only makes sense to expand the range of information cov-
ered to include those Kaplan and Norton advocate. This will require new report-
ing systems, as well as direction from senior management, since the exact mea-
surements selected will require some thought by that group. In addition, the
company will certainly want to see the traditional set of financial information as
well, so this will be an added task for the controller—but one that management
can use to track the performance of many more key functions than were previ-
ously covered by any sort of accounting reports.
Cost: Installation time:

13–14 CREATE A CONTRACT TERMS
DATABASE

It is a common occurrence for the accounting department to forget about the
terms of various agreements other departments of a company entered into, result-
ing in missed billings to customers or payments to suppliers. Due to the special
nature of these agreements, which usually fall outside of the usual accounts
payable and receivable systems, it is easy for them to be forgotten. Examples of
these contracts are billings for the sublease of company equipment, rebates, and
maintenance agreements. The typical result of these problems is either missing
revenue, because customers were not billed, or irate suppliers that were not paid.
In the latter case, missing payments to suppliers may also result in the failure of
key services to the company, such as failed maintenance agreements for key
equipment. Thus, a lack of attention to the terms of a company’s various contrac-
tual arrangements can result in lost revenues or services.
The solution to this problem is to create a database of all current contractual
agreements, along with a central file containing copies of all the contracts. An
example of a contract terms database is shown in Exhibit 13.7. This database lists
all of the key information about each contract, including the due date on which
billings or payments are supposed to occur, the termination date of the contract, the