Lies, Damned Lies, and Cost Accounting: How Capacity Management Enables Improved Cost and Cash Flow Management

by Reginald Tomas Lee Sr.

Business leaders rely on accounting data such as profit and calculated costs as a guide to whether they are making money. Should they? Accounting was designed to report financial performance not model cash flow. Accruals can disconnect cash flow from the timing and extent to which it occurs. Statements of cash flow do not provide insight into what was bought and how efficiently it was used. Costs and profits are not absolute, they change based on the model you use to calculate them. To manage cash, you must manage what you buy and how effectively you use it. The largest expenditure for most companies is capacity; space, labor, materials, equipment, and technology. Unless you model and manage capacity effectively, you will not achieve the cash flow results you seek. This book introduces capacity management, describes cash flow dynamics, and offers ideas about how to manage both. After reading it, you be able to see, understand, and manage cash flow as never before.

240 pages, Paperback

Published February 18, 2016

Reviews

[Ronald J. · Rating 4 out of 5]

The author sent me this book in response to a LinkedIn book review post I wrote on The End of Accounting, by Baruch Lev and Feng Gu. I enjoyed his take down of cost accounting, and his innovation non-cash vs. cash cost concept, rather than fixed vs. variable used by accountants. His thinking on capacity is right on, though I wish he would have flushed it out a bit more, or given examples. It's yield that matters, which is driven by better pricing, not more accurate costing! And cash flow is king. Good, short, succinct read.

[Bryan Almeida · Rating 4 out of 5]

Great insight on Cost Accounting,.