ColorAccounting.com - Accounting Literacy & Business Acumen
  • Home
  • About Us
    • Sales Partners
    • In the media
    • Newsletter
    • Blog
    • Links
    • Vision
  • Solutions
    • Workshops
    • Remote Workshop
    • Books
    • Other Formats
    • FAQ
  • Clients
    • Clients
    • Testimonials
  • Schools
  • Contact us
  • In the media

Ballooning Valuations

11/16/2018

0 Comments

 
Balance sheets are exact. The value on the left side precisely matches the right side. But do the books overall represent reality, where "value" is complex and floats up and down like a balloon?  

Let's illustrate the point: famous English anonymous artist Banksy sure knows how to make the value of an asset pop. ​
Picture
Banksy’s Balloon Girl painting, a beautiful piece in a hefty frame was recently auctioned for £1m. But as the gavel struck, a hidden shredder in the frame started to do what shredders do: shred. In front of the assembled haut monde, the painting emerged as flimsy strips out the bottom of the exhibit.
 
Except that the shredder got stuck. As they do. So half the painting remained intact, behind glass, and half dangled in the breeze. 

Banksy probably wanted to make a statement about art (and human) values. In the process he created an unexpected new work called Love in The Bin. The irony was that instead of destroying the value of the asset to make his point, he inflated it.

The intrinsic value of any investment is determined…  stop there. The point is, there’s really no such thing.   

It’s all in the eye of the gallery. There’s nothing you can absolutely bank on. 

Peter.

P.S. Pop me a note if you're inclined.
Picture
0 Comments

Ignoring Learning Science

11/1/2018

0 Comments

 
Virtually all kids can learn to read — if they are taught the right way. And yet for decades, only about a third of 8th graders in the U.S. have been proficient or advanced readers. 
 
Even though reading is the most studied aspect of human learning, this situation persists.  Why?
Picture
Most school reading classes assume that learning to read is a natural process, like learning to talk. But it isn't.  Decades of scientific research has proven this.  The human brain isn't wired to read.

As this article from American Public Media say, kids must be explicitly taught how to connect sounds with letters.  They must learn phonics.

It's frustrating to see a better way, a known effective method, go to waste. 

A simple fact also explains the why people can't read balance sheets and income statements. It's not because of the numbers.  It's because they don't understand the words.  

Like English teachers should be teaching sounds, accounting teachers should focus more on what the few critical accounting terms mean (and don't mean.)

Revenue doesn't mean money, even though many dictionaries say it does. Revenue is an activity, not money.  

Equity isn't a stake in a business . That would be an asset, as seen from outside the business looking in. Equity is inside the business looking out.

Phonics helps accounting students too.  We ask, what's the sound of income? Everyone answers ka-ching.  But that's the sound of cash.  Better to say, snip-snip, in a hair salon.  Or type-type in a law firm. 

But enough of me sounding off.  Thank you for reading this. 

Peter. ​
Picture
0 Comments

The Formidable Power of Story

10/18/2018

0 Comments

 
When the Amazon senior management team meets with CEO Jeff Bezos there's no PowerPoint slide in sight.  Instead, they start with up to 30 minutes of silence while all read a better communication tool: a 4-page narrative memo. 

He explained why in an email in 2004, and recently in a report to shareholders.
Picture
"Writing a good 4-page memo is harder than writing a 20-page PowerPoint because the narrative structure of a good memo forces better thought and better understanding of what's more important than what, and how things are related." wrote Bezos. 

I highly recommend this piece by fellow educator Shawn Callahan, that explores the subject of narrative deeply and concisely.  It so resonates for me. 

In Color Accounting seminars we make the point that human beings do story.  They've done so for thousands of years.  Beginning. Middle. End... Flow. Direction. Conclusion. 

Stories help us make sense of the world. 

We start our workshops with a page of zebra-like numbers that most recognize as a balance sheet and income statement.  Holding up the page we say, "If we can turn this page into a cogent business narrative, we will have succeeded in our learning."  

No guesses for where we end the day.  (It's a great story.)

Peter. 
Picture
0 Comments

Numerical Stage Fright

10/4/2018

0 Comments

 
In 1992 Vice President Dan Quale added an infamous “e” to the correct spelling of “potato”, and it made world headlines. 

He later  wrote: “It was a defining moment of the worst imaginable kind. I can’t overstate how exasperating the whole event was.”  And who of us can't relate to thinking in the spotlight?
Picture
Fast forward to 2017 when British politician Diane Abbott nervously spluttered on radio as she tried to explain her plan for an additional 10,000 police officers… only she couldn't do the simple costing on air.  She started with £300,000 before changing to £80m. That gives a range of between £30 and £8 000 per police offer per year.  Bargains both. 

South Africa's President Jacob Zuma famously got tongue-tied in parliament and couldn't pronounce a number in the billions.  He just couldn't get the words out.

Stage fright and stress do weird things to people's mental abilities.  Research has proven a strong correlation between emotions and cognitive functioning.

Best we all take a chill-pill around our numbers.  Seriously relaxed is the way to go. 

Peter. ​
Picture
0 Comments

The Ferrari Accountant

9/20/2018

0 Comments

 
Sergio Marchionne died this summer after leading Chrysler from certain bankruptcy, and then doing the same for Fiat.  

He was a remarkable personality in the auto industry... a chain-smoking workaholic who knew not much about cars before taking over as CEO of Fiat and later merging it with Chrysler.
Picture
Marchionne did things differently, and knew what numbers to pay attention to.  

He spent money on the seemingly little things like bathrooms.  "How can you build nice cars when the employees' bathrooms are unfit for the workers?"  

While he said, "Please don’t buy our electric version of the cute Fiat 500."  He knew they lost $20 000 on each one.

But he saw the profits in Ferrari, which he spun off to be a separate company from parent Fiat Chrysler Automobiles. 

In the end, his results measured up.  After rescuing Chrysler from liquidation in the crash of 2008, he turned the company he bought for $2bn into an asset worth $84bn. 

Farewell to you Mr Marchionne.  You were fast driving even as you left your marque. 

Peter. ​
Picture
0 Comments

Dan Brown's Next Mystery

9/6/2018

0 Comments

 
Wouldn’t it be exciting if Da Vinci Code author Dan Brown got his hands on the story of renaissance mathematician Fra Luca de Pacioli?
 
The good friar was the friend of Leonardo da Vinci. If Dan Brown unpicks difficult mysteries, Pacioli did the same for Da Vinci, helping the artist solve the challenge of the Last Supper’s famous dimensionality.
Picture
The Last Supper may have been a mere snack if Luca hadn’t helped with the painting’s dimensions.  Pacioli guided his friend in seeing clearly how to fit the treasured work onto the awkward confines of a monastery dining room wall, above a doorway.  And since then the friar has enabled us to see clearly too.  

His 1494 treatise on how accounting works laid down the lines that have been used to shed light on business ever since.   

C'mon Mr Brown... there’s got to be a bestseller in there, no?  A genius accountant sees how to unravel the mysteries of corporate intrigue and makes a meal of the villains. 

Yours in transparency, 

Peter
Picture
0 Comments

The A-Bee-C of Success

8/24/2018

0 Comments

 
​Me & the Bees is creating a buzz.  Mikaila Ulmer turned her great-grandma’s lemonade recipe into an $11M Whole Foods deal.  From which part of the profits go to honeybee causes.

Honey lemonade is sweet, but sweeter still is the story: Mikaila is just 13 years old and started the business at the age of four.
Picture
​The lemonade’s winning ingredient may well be the honey, but it’s also business acumen. At the age of four, while most kids bring their teddy bears to show and tell, Mikaila had a lemonade stand at a children’s business fair.

Lemonade stands are an almost mythical  entrepreneurial platform for children. And yet here is this young lady from Texas creating a very real business from her sidewalk venture. 

The delightfully articulate Mikaila appeared on Shark Tank and talked to NBCabout how she got (literally) stung when she was starting out.  Methinks with her business savvy, and no-doubt presence of behind-the-scenes advisors, this social entrepreneur won't get stung in business too often.

Wishing you a sweet week,

Peter
Picture
0 Comments

Profit Fads and Slippery Slopes

8/9/2018

0 Comments

 
Investors use a company’s profit this year as a starting point for predicting next year’s.  The prognoses drive the company’s share price. 

When making those predictions, it can be reasonable and make sense to adjust the reported profit figure so that it better foretells the future.  But that’s where the trouble begins. ​
Picture
If your head-office burns down and leaves you with a big expense, a reasonable person will agree that the mishap probably isn’t going to recur next year.  So go ahead and report a hypothetical profit figure that ignores that once-off expense.  

Slippery slope alert here. 

Indeed, while you’re at it, ignore all the expenses that aren’t reflective of what you earn from your regular operations. And why not also ignore those expenses that don’t immediately require cash to be paid.  Hey, why not also ignore expenses that differ between parts of your business, like rent-in-New-York versus rent-in-Little-Rock.

These practices give so-called adjusted earnings figures, such as EBITDA, EBITDAR, EBITDAO, EBITDAX.  Thesare are acronyms for...oh, never mind. Some other time. 

Before you know it, you’ve got what famous investor Charlie Munger called “bullshit earnings”. 

Don’t get us wrong… there’s a time and a place and a good argument for judicious use of reported-profit adjustments.  But there’s also that business of too-much-of-a-good-thing. 

Sending eyes-wide-open regards, 

Peter
Picture
0 Comments

Scoring Value at the World Cup

7/26/2018

 
Before winning the Soccer World Cup, France coach and former captain Didier Deschamps said: “I hope the players benefit from my experience, but this is their final. It is something they have worked for”.

In the victory jubilation Deschamps was tossed in the air by his winning team and had every reason to feel proud of his role as steward of talent.
Picture
Business managers do well to imitate the French coach's appreciation of his people. To get the best out of your team, you need to value your players as your company’s biggest asset. They are the make or break between success and failure.

Research has shown that the number one determinant of happiness in the workplace is being appreciated. As a manager, your regard for your team members will determine how they perceive their value, and ultimately how they perform.

Accountants don’t show the value of people on a balance sheet. (Because we don’t own them and can’t measure their worth.) And yet HR managers rightly say “people are our greatest asset”.  

At a soccer club, the contractual right to use the services of a player, if not the actual person, is often listed. For example, World Cup breakout teenage star Kylian Mbappé's contract is worth a cool $210m. 

No need to remind his manager that business is both a people-game and a numbers game. 

Wishing you a goal setting and scoring week, 

Peter
Picture

Calculated Confidence

7/19/2018

 
A meme is trending on the Internet at the expense of math teachers. It goes something like this: “Remember your math teacher saying ‘You won’t have a calculator everywhere you go?’ Haha. They were wrong!”

A picture of a smartphone then follows as proof of said teacher’s mistake. But hang on a second.
Picture
Calculators are ubiquitous. But former math students shouldn’t be gloating. Always-at-hand calculators have made us lose our mental numeracy.  And that’s a bad thing.  Because numeracy goes beyond numbers. It allows us to reason and solve problems in both our professional and personal lives.

Numeracy is closely linked with self-esteem, which in turn affects decision-making. When we solve a math challenge, we gain confidence and the ability to navigate life situations with positivity and innate self-belief.

In working with business numbers, as with mental arithmetic,  practice builds confidence, and confidence encourages practice. 

The more confident managers feel around financial statements the more they use them, and the more insights they gain about their business.  The result is better decisions. 

We educators are first and foremost in the confidence building business. 

Peter
Picture
<<Previous
Forward>>

    Blog
    ​

    RSS Feed

    Or simply subscribe here to get it by email.

    Author

    Co-founder Peter Frampton is the lead author of this blog.

    Picture
    View my profile on LinkedIn
    If you are interested in a #financiallyconsciousworld, join the conversation at Color Accounting Friends on LinkedIn.

    Archives

    March 2020
    December 2019
    November 2019
    August 2019
    June 2019
    April 2019
    March 2019
    February 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014


    RSS Feed

    Get notified:
    Use the RSS feed above or 
    Get the e-newsletter here...

    Categories

    All
    Accounting Literacy
    Account Management
    Assets
    Business Acumen
    Color Accounting
    Colour Accounting
    Costs
    Financial Literacy
    Investment
    Joint Value
    KAM
    Key Account Management
    Learning Style
    Luca Pacioli
    Organisations
    Resources
    Revenue
    SAM
    Silos
    Strategic Account Management
    Strategic Relationships
    Transactional


Finance and business acumen workshops for non-financial people using a breakthrough graphical system
© All rights reserved. Color Accounting International (1992-2019)
'Accounting Comes Alive', 'AccountingSchool.org', 'Color Accounting', 'Colour Accounting', the zebra icon AccountingSchool.com and 'BaSIS Framework' are trademarks of Color Accounting International.
Contact Us |  Corporate  |  Legals  |  Partner Orders  |  Register Event Held  |  Educators' Resource Center
  • Home
  • About Us
    • Sales Partners
    • In the media
    • Newsletter
    • Blog
    • Links
    • Vision
  • Solutions
    • Workshops
    • Remote Workshop
    • Books
    • Other Formats
    • FAQ
  • Clients
    • Clients
    • Testimonials
  • Schools
  • Contact us
  • In the media