I wrote this book for the curious business man and woman. You are the ones who are always looking to learn more. Through your learning, you’ve likely realized that there is too much focus on accounting data and not enough on understanding the factors that influence the data. You see your colleagues, bosses, peers in other companies, and those who work for you make decisions that make you scratch your head even though the analyses may support that decision from an accounting perspective.
Although this is not an accounting book, I suspect, based on early feedback and from those who have read my other works, that many accountants will not only read this book and gain insights into the numbers they deal with, but also the limitations of accounting data and how it may keep your organization from moving forward. This book will create a language and an approach that will allow you to align with operations to create a team to move your organization forward.
This is not really an operations book either. Although many operations-based ideas such as capacity management, efficiency, and productivity are addressed, the purpose is to show how these factors influence how your company spends money and manages what it bought. You’ll see that you can model everything you do operationally with the tools in this book, and you’ll be able to understand and model the cash flow dynamics of what you do and the improvements you want to make.
There will be people who dislike this book, and that is ok. The foundations of this book are based purely in mathematics. Over the past two decades of developing these ideas and sharing them with a global audience, people have fought the ideas and have said mean things to and about me, but no one has refuted the math. That is what matters to me; developing a robust tool that will help others.
The book is written under the premise that cash flow is what is most important for a business. It is broken down into three parts. The first part explains why the income statement and certain accounting practices are not good proxies for managing cash flow. Many accountants already know some of this, although many do not know why. The second part introduces the idea and importance of capacity. For most companies, this is where you spend most of your cash, yet is is widely misunderstood and ignored in accounting and, in fact, business at large. In my opinion, this is the most overlooked component of how businesses operate, function, and influence cash flow decisions. The third part deals with applying some of the ideas from my first book, Explicit Cost Dynamics, to offer leaders ways to model capacity and cash flow, and to make better decisions with the information.
I thank you for giving me the opportunity to share these ideas with you. I hope you will find them valuable and useful in your work.