Accelerated Accounting

In a world where business is becoming faster, smarter and influenced by the latest algorithm, the foundations of accounting have been underpinned by better delivery of the basic concepts of double entry book keeping and an even faster journey from basic input through to ultimate user friendly information. In terms of speed we are in real time profit and losses and relevant KPIs which are acting as instant barometers of corporate success. Whatever delivery system you are using from the myriad of software providers, there seems to be some common themes ( and pitfalls)  to this accelerated information.

1 We are becoming obsessed with the now and dips in performance rather than taking a longer term view about the overall trends and having bias in our risk averse in that we don’t like today’s dips but ignore the overall trend of upward performance. When companies report a decrease in Revenues in one quarter they may well forget to mention the cumulative performance and expected annual out turn, such is the demand in the market for short term profits and putting pressure on immediate action.

2 More demand are put on flash figures so immediate monthly results are required straight after the month end. Once these have been published, follow up and more accurate accounts appear to be vestigial and of no further use because either the reported performance is great or, if it isn’t, then corrective action has already been taken

3 Faster information has the disadvantage of influencing future forecasts, especially when combined with real time information (see 2 above) and therefore peaks and troughs may be more extreme

4 The provision of real time information comes at a cost of lack of provenance. The age old question of where did this number come from rears its head and then we get into discussions about how deep a concern about the accuracy of any estimates in the figures and management reports get more fragile and assumption laden to be almost meaningless.

The first casualty of speed is accuracy, especially when there are demands on outcomes and measures of success within a real time framework with incomplete information.