Page 33 - Finance for Non-Financial Managers

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Finance for Non-Financial Managers
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Multiple examples of these can be found in names we recog-
nize—IBM, Intel, and Apple Computer, to name a few.
Excellent companies, by contrast, seem to be forever resur-
gent, and while they occasionally pause in their progress, they
never seem to actually go into decline. Examples that readily
come to mind include General Electric, Southwest Airlines, Wal-
Mart, and Microsoft.
A major difference among these companies, perhaps the
overriding one, is their ability to react to change. Change
impacts the ability of a company to capture and hold onto its
market, to grow its business, to profitably sell its products, and
ultimately to survive and prosper.
My 15-plus years of consulting experience tell me that the
tendency of most business activity is to find those processes
that seem to work and then repeat them over and over as long
as they continue to function. This is considered efficient and
among the proven techniques for maximizing profitability.
However, every manager of a company, or a department, for
that matter, must learn to differentiate between those business
processes that must evolve, like research and development, and
those that should remain stable. Financial accounting is one of
those processes that need a high degree of stability.

Tracking the Life Cycle of a Company

As we have all learned in the past year or two, financial
accounting probably needs more stability and less evolution
than it has experienced, in order to give it adequate credibility
in the eyes of the users of financial information. Managers rely
on financial reports prepared from accounting data to guide
their business decisions. Investors rely on those same reports to
guide their investment decisions. Government relies on many of
the same reports to collect taxes, enforce our laws, and protect
investors, employees, and customers of those companies. Thus
the recorders of financial data in a company carry a heavy
responsibility to provide information that is, in a word,
ARTistic—accurate, relevant, and timely.