And you guys had the nerve to talk smack about me trying to give inheritance advice yesterday. Pfft.
In a recent article entitled Basics of Accounting Are Vital to Survival for Entrepreneurs, the New York Times tells the tale of Bart Justice, an industrial engineer-turned-business owner who decided to start a mobile document shredding business in 2004 after a rash of new security laws. Justice got a loan from the bank, bought a mobile shredding truck, hired a driver and opened a shop in Huntsville, AL called Secure Destruction Service. Sounds good, no?
In its first year, the company had $70,000 in sales. Within four years, the company had annual revenue of $500,000, six employees and two offices. Again, that sounds great but revenue is not the same as equity or net worth, even a non-accounting nerd like me knows that much.
When he wanted to add another shredding truck, Justice went back to the bank and borrowed more money. The bigger he got, the more money he needed to borrow. Somehow, he didn’t understand that this borrowed money was not actually revenue and was, in fact, a liability as he had to pay it back at some point.
“I knew how to print a financial statement from QuickBooks, but I couldn’t tell you what it meant,” he said.
Fast-forward to 2008, when Justice joined a peer group for Christian business owners. “They would ask me questions about my numbers, and I didn’t know how to answer them,” he said. “They told me my business was going to fail unless I got a handle on paying down my debt.”
No shit, Sherlock, did you need a financial professional to tell you that?
Here’s the gist of the article: if small business owners don’t get number-crunching, put the money out and hire someone who does. What the NYT does not have the balls to suggest is that small business owners should stop saying “I hate accounting” because they think it’s still cute and go out and take an introductory accounting class or two. No one expects business owners to be able to pull analytics out of their asses but it can’t hurt to maybe at least understand that you want liabilities to be less than assets to stay alive.
We all know about getting a credit rating. Whether it’s for a personal credit card, a supply chain vendor authorization, or the much maligned oligarchy who rate public companies and entire nations. Based on al ion, a score is developed that (attempts) to capture the inherent risk of a credit failure.
How much could firms benefit from getting a Technology Productivity Rating?
What is the risk of a technology failure?
If an objective ratings agency existed that scored a company’s use of technology, how well would other people score your company? Who is the ‘Greece’ of technology?
To rate technology productivity, the rating has to encompass the entire organization and the way in which technology extends to external stakeholders (customers, suppliers, staff, etc). Optimal productivity from technology doesn’t simply mean newest technology. It’s not just about what technology a company uses that matters. It’s about how the technology is used. I met with a colleague in the technology industry recently who went so far as to say there’s still times when a FAX is the optimal technology for a task. It depends on the potential outcomes and workflows.
To date, I think the focus of technology productivity has been too inwardly focused in companies. Companies say, ‘How can this technology benefit us?’ instead of looking at the workflow effects for external stakeholders too. Granted, most organizations are completely overwhelmed simply by this one-sided approach. But if you look closely at some productivity software, part of the “technology” benefit is actually a workflow transfer to external parties. If I had to rate the technology, the score would decline in the event of workflow transfer being masqueraded as technology.
Supply Chain Management
As a means to increase productivity, big companies implement supply chain management systems that effectively transfer the burden for account administration to the vendor companies (sometimes they even charge a fee!). For the implementing company, it is great. All the vendor information is keypunched and filed away into the database for free.
The system integrates with the ERP for invoice approvals all the way to point of payment. The internal technology productivity score is high. For the vendor, every new customer could conceivably mean a similar routine resulting is a productivity loss and therefore would rate the technology lower. A vendor with a lot of customers practically needs a Mechanical Turk just for the data entry!
Seeing these scores could be really beneficial when vendors are choosing what customers to prioritize.
Recruitment
Recruitment technology can be burdensome to external stakeholders while being helpful to internal stakeholders in a similar way. The key to recruitment technology is capturing candidate data to enable filtering and search. Some technology in this field is simply transferring the data entry task to the candidate. Each candidate types out their life story field by field, row by row. From the company standpoint, they see the output of the technology. It is good. From the candidate standpoint, they see a time sink.
Taken in isolation, this candidate time commitment is not a big deal. One candidate typing their qualifications one time in response to one job posting is fine. But what happens when the candidate is applying at a dozen jobs? Two dozen? At what point does the opportunity cost of doing a whole bunch of data entry deter the brightest candidates from these particular employers?
The brightest candidates will apply to the companies that DON’T require a massive typing drill first, selecting away from this less productive technology until it’s unavoidable. The overall technology productivity score would take this into account.
For a company purchasing new technology, understanding the opportunity costs both from your perspective and that of external stakeholders and developing a Technology Productivity Rating may not become a formal process. There is no Technology Productivity Bureau, or least, there isn’t anymore. There was… for a short time… an idea before its time… may it rest in peace.
Perhaps it’s enough to look at it from a more macro-level. Ask yourself, is my business technology liberating for stakeholders or, or are they being repressed? Then, act accordingly.
Geoff Devereux as been active in Vancouver’s technology start-up community for the past 5 years. Prior to getting lured into tech start-ups, Geoff worked in various fields including a 5 year stint in a tax accounting firm. You can see more of his posts for GC here.
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
Looks like President Obama could have an unexpected ally in his push for alternative forms of energy: small business.
That, at least, is the conclusion of a study of 800 small business owners and their attitudes towards clean-energy policies conducted by several groups, including Small Business Majority, a small-business advocacy organization.
The study found that most small-business owners support having a clean-energy policy and think the right moves can jumpstart the economy and create jobs.
Specifically, 50 percent back clean energy and climate legislation that would “limit pollution, invest in clean-energy sources and encourage companies to use and develop clean-energy sources” and “put a price on carbon emissions from energy sources like coal and oil, so companies would have to pay if they release these emissions into the air.” And 61 percent feel that moving the country to adopt new, alternative forms of energy is a viable way to restart economic growth.
That’s in spite of the fact that nearly two-thirds think a new energy and climate policy would increase their costs–quite something, considering the really small size of most of the respondents, 79 percent of whom have five or fewer employees.
Still, the majority also would be more likely to support new legislation if they received government incentives to help reduce the costs of introducing energy-efficiency improvements. For example, 62 percent would support a bill if it included interest-free loans for upgrades. Fifty-two percent would be more likely to back legislation if they received grants or subsidies for energy improvements and if they had access to free training or consultation on how to profit from the emerging clean-energy industry.
Of course, other studies have come up with notably different conclusions. Early this year, for example, the National Federation of Independent Business (NFIB) found that 66 percent of small-business owners and managers oppose a federal cap-and-trade system.
But if Small Business Majority is correct, then, if he plays his cards right, Obama might wind up with significant small-business support at a time when he’s going to need it badly.
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