Operations Accounting - transforming the Unknown to the Known.

Analytical Procedure = Rules that govern Organizational Behavior

 

Diagnostic technique listens to symptoms, observes the environment and examines financial, and operational transactions. The method validates and explores to discover core issues.

  • Validate what you know – making sure it is correct
  • Explore what you know, you don’t know – new insights
  • Discover what you don’t know, you don’t know – epiphany moments

This is a continuous process of preemptive abnormality revelations.

 

Applying the medical model, you begin with the vital signs - pulse, blood pressure, temperature = financial analysis. Probing subledger transactions via operations accounting validate, explore, and discover. Data classification, segmentation and applying the Pareto principle present a picture of the core issues and requirements.

OPERATIONS ACCOUNTING

 

Firms need the ability to understand their cost structures, margins, and inventories. The advantage of the digital environment is that there is a wealth of information. The following issues complicate your ability to leverage this advantage.

  • Disparate software suites complicate linking data elements into a complete picture.
  • Dependency on Excel and Word as part of the business processes require discipline.
  • Operational cost – understanding the cost of products and services.
  • Calculating the thruput velocity, critical paths, and bottlenecks

 

Operational accounting is the practice of understanding the operational health of your organization via analysis of the business transactional cost. This requires knowledge of cost accounting which is the recording of all cost incurred in your organization. These costs are the basis of finding operational improvements.

 

Operations accounting focuses on the order fulfillment thru-put, identifying critical paths, constraints, which provides the ability to measure the velocity of the thruput. The operational transaction activity and cost explain the general ledger status. The operations accounting provides and reports the various subledger activity that create the financial statements for your organization.

Finding the Core

Examining the individual tea leaves

Looking from afar the tea plantation leaves look the same. Closer investigation shows that each tea leaf and tea branch is different. In order to understand the tea plantation you must look from both the horizon and the individual tea bush.

 

The best practice approach consists of:

  • Validating what you know
  • Exploring what you know, you don’t know, leads to
  • Discovers what you don’t know, that you don’t know

 

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