Fifteen years ago, many small businesses weren't computerized at all. They worked from manual systems. Pen, accounting paper, pencils, erasers, and calculator were all they needed to grind out books.
If the owner of the company needed to know what accounts receivable were, the bookkeeper dutifully dragged the unpaid invoices bin out from under the desk, found the calculator under a pile of papers, and added the invoices one by one to come up with a total. It could take over an hour to get a good total.
If the same owner wanted an aged accounts receivable listing, the process took a nastier turn. After the bookkeeper pleaded, begged, and sulked about having to do it, it was done manually. Each invoice painstakingly aged onto an accounting spreadsheet. The whole process took hours, even days. That's why most businesses didn't do it often. They just watched for customers that had invoices that never got paid.
Inventory was even more complex. It was a card system. Each time inventory was received, the receipt was written down, along with the cost. It was easy to see what the total quantity of an item was, assuming that the inventory clerk had extended the totals, but getting a picture of the total value of inventory took days. An accountant manually priced each item, extended the price, and made a worksheet.
Sound like the dark ages? It was. Most businesses today, even small ones, can print a costed inventory listing or an aged customer receivables listing at the touch of a button. The manual number crunching is gone.
All of the manual number crunching went away in the stage of computer development I called DP thinking in a previous article. Problem is, now that we have all that information, it's not accurate. Let's take inventory as an example.
Inventory listings are terrible. You call a business to order a product and the salesperson says, "The computer says we have nine, let me go check on the shelf." There could be twenty, twelve, or two of the product actually in the back room.
Businesses that have this situation are STUCK! They can't move forward with using the computer because the information they have is junk! They don't trust the computer system, and the computer system doesn't produce the data they need. If the computer did produce data, executives wouldn't trust it, because the backroom shelves disagree with the computer so often that they don't have any reason to trust it.
This isn't a new problem, but most business executives think it is. Perpetual records (the cards fifteen years ago, or the computer today) have often--very, very often, it turns out--not agreed with one another. When the manual card system got off, the inventory clerk marked through the number and wrote the new number. Since the inventory cards weren't connected to the financial statement, the owner never saw the adjustment.
If the owner of the company needed to know what accounts receivable were, the bookkeeper dutifully dragged the unpaid invoices bin out from under the desk, found the calculator under a pile of papers, and added the invoices one by one to come up with a total. It could take over an hour to get a good total.
If the same owner wanted an aged accounts receivable listing, the process took a nastier turn. After the bookkeeper pleaded, begged, and sulked about having to do it, it was done manually. Each invoice painstakingly aged onto an accounting spreadsheet. The whole process took hours, even days. That's why most businesses didn't do it often. They just watched for customers that had invoices that never got paid.
Inventory was even more complex. It was a card system. Each time inventory was received, the receipt was written down, along with the cost. It was easy to see what the total quantity of an item was, assuming that the inventory clerk had extended the totals, but getting a picture of the total value of inventory took days. An accountant manually priced each item, extended the price, and made a worksheet.
Sound like the dark ages? It was. Most businesses today, even small ones, can print a costed inventory listing or an aged customer receivables listing at the touch of a button. The manual number crunching is gone.
All of the manual number crunching went away in the stage of computer development I called DP thinking in a previous article. Problem is, now that we have all that information, it's not accurate. Let's take inventory as an example.
Inventory listings are terrible. You call a business to order a product and the salesperson says, "The computer says we have nine, let me go check on the shelf." There could be twenty, twelve, or two of the product actually in the back room.
Businesses that have this situation are STUCK! They can't move forward with using the computer because the information they have is junk! They don't trust the computer system, and the computer system doesn't produce the data they need. If the computer did produce data, executives wouldn't trust it, because the backroom shelves disagree with the computer so often that they don't have any reason to trust it.
This isn't a new problem, but most business executives think it is. Perpetual records (the cards fifteen years ago, or the computer today) have often--very, very often, it turns out--not agreed with one another. When the manual card system got off, the inventory clerk marked through the number and wrote the new number. Since the inventory cards weren't connected to the financial statement, the owner never saw the adjustment.
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