Finance is a Liar Sometimes

There are numerous ways to measure success for a specific company. Whether it is pure revenue based, maximizing capacity, or providing the best quality, each company has its own specific way of measuring its success. The article from industry week discussed the dangers a company has when they use financial-based planning. One example the article gave when discussing a poor financial measurement was inventory. In the world of accounting inventory is considered a current asset. A current asset relies on liquidity and more specifically so being able to convert into cash within a year. The problem with that definition is that it relies on the fact the inventory will eventually be sold. The article stated that, “High inventories therefore mean longer cycle times, longer lead times and less responsiveness to customer needs.” That quote essentially means that the more inventories a company has the ability to change becomes weaker. 

Cheap offshore labor as a method as cost savings was also mentioned as being expensive. In the books, cheap labor looks attractive as costs are being minimized and more products are being able to be made. However, with off shoring come defective goods. In my own experience, anytime I order something through Amazon which I know is coming from China I am taking a risk. 50% of the time my order will be completely defective. If not defective, the quality will be sub-par. That level of quality cannot be measured by a financial metric and as a result is not taken into account with valuating success on a revenue based level.

 henry ford image

The measures to which a company should measure their success as the article states (and I agree as well) are the three KPIs: Time, Material, and Energy. Henry Ford was a strong component of these measurements as he believed, “time, material, and energy are worth more than money because they cannot be purchased by money.” Taking into account that belief, there then becomes four major points consulted when making decisions and improvements.
1. Waste of the time of people
2. Waste of the time of things
3. Waste of materials
4. Waste of energy
All four of those points touch on the certifications we have been talking about in class. While the six sigma is not discussed in the article, concepts of lean manufacturing are present throughout. In addition, ISO 14001 certification is mentioned. An example is given that it is not only wasting raw materials it is also wasting the scrap materials. Ford specifically showed this method that even though back in his time he could have thrown scraps in the river he instead decided to use it to make something else. This allowed him to maximize raw and scrap materials which led to cost savings. In accounting, and financial reporting that is never take into account. Through this article I really understood that while financials are important that should not be the only measurement used to determine a company’s success.

 

1.) What do you think is the best way for a company to measure success?

2.) Are resources such as time, energy, and materials equally important? Or does one stand out from the rest?

3.) What are some of your own personal experiences when  ordering goods from overseas?

 

http://www.industryweek.com/leadership/when-finance-runs-factory?page=3

Tax Season

I had an internship with a Big 4 accounting firm. I was practicing international tax which focused on individuals who were expatriates and foreign nationals. Not only did I have to know how to do a domestic return and understand the tax code for domestic issues, but I also had to take into account international tax issues and situations. If you’ve ever worked at a firm who does taxes, the process during the winter is huge and complex. Our department has a structure and the managers/directors really take on the management role while the lower-level associates will do most of the leg work in preparing the tax returns. Without getting to technical, tax returns were just one of the many services we were doing during this past busy season. Nevertheless, the volume and complexity of our clients made it imperative that there was strong management controls in place for work-flow to be smooth and consistent. After learning some management concepts these last couple weeks, I realized how my managers actually integrated these strategic techniques to deliver timely and quality deliverables to our clients.

Without getting into too mch detail and depth, I wanted to explain some techniques that they utilized. First some background information. We have multi-national companies as clients but we do not do the companies taxes, we do the employees taxes. This amounts to thousands of tax returns that need to be done by April 15 (sometimes sooner). The tax returns will either be done at the local office (Chicago) or be sent to our India processing center. The amount of work and complexity of the tax issues is what decides how the tax return will be handled whether it would be done by the local office or India. These are usually judgement calls by management so that they can utilize their resources to provide the highest quality at the lowest cost. In addition, the tax return has a long multi-step process.

This multi-step process had to use a project network – similar to what we did in class. A tax return has these steps. 1. Taxpayer fills out questionnaire 2. Tax Analysis (find missing information) 3. Tax Analysis review 4. Frontloading (input information to do tax return 5. Frontload Review 6. Send to processing for data input 7. Processing review 8. Deliverable

Each step has a set estimated time of completion but some steps can be started while others are being worked on. A critical path would be set and slack time existed in this chart. It was managements daily responsibility to analyze work-flow and see where the projects (tax returns) are in the path.

At many companies, we as college students usually start off in positions take don’t require much management techniques or strategies that are to be personally implemented by us but as we progess, our jobs get much more focused and oriented on developing these skill sets.

Has anyone else worked at a tax firm that experienced something similar to what I have?

Software to Simplify Project Management

Learning about the aspects of project management was interesting to me because a business can be successful unless it manages it projects successfully.  I worked at a painting company one summer and our project management was directly linked to how successfully we completed a job.  The owners of the company had to assess how much time would need to be dedicated to a project and how much it would cost to complete.  They would also choose which employees they wanted to do which job.  The employees who performed the best were put on the most important projects.  Project management was successful at our company because we had clearly defined goals, each job was unique, the jobs required our specialized skills, and all of the projects were temporary but each was essential to the success of the company. 

 It was also essential for our company to use the process of planning, scheduling, and controlling.  The planning stage included figuring out what products or tools would be needed to complete a job, figuring out who would be put on the job, figuring out transportation, and other things of that nature.  The scheduling stage would include decisions like the jobs start date and the estimated end date.  They would also need to schedule when they wanted the job to be completed during the day.  Some jobs could only be worked on at night because the business could not be disturbed during the day. The controlling aspect would be making sure that everything is going according to schedule and that the quality of the work met company standards. If a job was substandard then adjustments had to be made to scheduling to fix the problem. 

The owners of the company also had to decide which projects took precedence over others.  Sometimes we would be told to put a current project on hold because more important project required more attention.  Deciding which projects take precedence is essential to the company’s success because you need to be able to understand which accounts are most important to your business so you can keep them happy. 

Keeping track of all of this would be very stressful.  However technology is being designed to make managing projects a little bit easier.  The company semYOU has come out with new project management software called sem.ProjectPoint(http://www.prnewswire.com/news-releases/cloud-project-management-semyou-releases-new-version-of-semprojectpoint-159862105.html).  This is cloud based software so it allows you to store and easily share information throughout a company.  It also allows you to view information about your company in useful ways such as in pie charts or other forms.  This allows you to quickly find overviews of what’s going on in your organization and will help to identify a company’s needs.  Would integrating this new technology into a company’s project management process be beneficial to an organization, or would it interfere with their existing methods?

on Time with errors

We discussed different aspects of project management during our last class, which are highly important and rewarding if applied properly in real life. However, some projects, if not most, can go towards unwanted directions or results.

In the company I work with, we had a project of launching a new system at a specific budget and within a very short time (6 months). Both cost and time were out of negotiation, so we couldn’t increase the allocated budget nor increase or extend the project period. This was a real challenge and a very stressful situation. So what did we do? We worked together, the project
manager and the functional lead, and put all our effort in planning the project from the different perspectives of a project, such as:

  • Project integration management.
  • Project scope management.
  • Project time management.
  • Project cost management.
  • Project quality management.
  • Project human resource management.
  • Project communications management.
  • Project risk management.
  • Project procurement management.

It might sound a bit complicated, but with the help of PMBOK guide, which is a frame work for project management, we were able to plan and execute the project efficiently.

For more information on PMBOK guide, please click the below link:

http://en.wikipedia.org/wiki/A_Guide_to_the_Project_Management_Body_of_Knowledge

Our project was delivered on time and within budget but of course the output quality of the project was not superb. Because the emphasis from the higher management was on time and cost, we had to deliver a lower quality system that suffered from minor issues which were considered as none show stoppers.

Another issue that has contributed to the output quality was the changing requirements of system users. As the project progressed, the end users of the system had a clearer picture of their requirements and how the system should behave in
different cases. Such requests for changing the requirements or adding additional requirements are handled by monitoring and controlling process. Most of the requested changes were considered as chargeable change request, which means that we have to pay additional cost to the system vendor, and this of course was unfeasible, hence, the change requests were declined and the system did not deliver the modified or additional requirements.

From management point of view, they were happy that the project was delivered on time without exceeding project budget, however, from end users’ view; they considered that the project did not fully satisfy their requirements.

I personally think that we could have achieved a better quality results if the project was scheduled for a longer period (more than 6 months) because for any system, it has to meet end users’ requirements, and because it’s the end users who are going to use the system, not the management.

Do you think we should deliver a project on the specified time and cost even if the project’s output suffers from errors?

How would you act if you are in a situation where the higher management is only concerned about time and cost but not performance?