London Underground – profitability and costs in the early days
London underground (Photo credit: @Doug88888)
I have been reading a book recently on the history of the London Underground. It’s called Underground to Anywhere by Stephen Halliday and I actually bought it in the London Transport museum, on Covent Garden. Of course the tube is 150 years old this year, and you will find more about that here.
Reading the book I was quite surprised by how much accounting was in there. Two things stand out from the early days of the tube which related to accounting. First, the financing seemed to be quite precarious. As each line was built by private companies, private finance was raised. And when results proved less than expected, it seems quite a bit of creative re-financing went on. The author actually notes that without the somewhat suspect and complex financing, London’s Underground may not have grown to what it is today.
The second thing was the fares structure in the early days. Before lines were connected, the fares seemed to have been standard at say 2 pence. However, the author notes that the various companies started to raise and lower fares and certain times, or lower fares overall to increase passengers numbers and revenue- a classic cost, volume profit (CVP) scenario.
Fraud at Olympus
Internal controls and fraud are not really an area that I write a lot on. Just before Christmas I read this article from CIMA about fraud at Japanese firm Olympus. It includes interviews with Michael Woodward, who was at the heart of putting things right. The are a lot of issues in the article and it is worth a read.
The problems with big data?
Big Data (Photo credit: Kevin Krejci)
The previous two posts have hopefully given you a very brief insight into what big data is and how it can help even small organisations. Now let’s briefly consider larger organisations. Nowadays, even if a company like amazon can process a few million orders a day, the amount of accounting data associated with this (i.e. a few million invoice and a few million payments) seems insignificant if we start to think about other data that might be collected at the same time. For example – and these are just a guess on my part – the age, sex, location of the purchaser, the type of device they searched and bought on, what the looked at before buying etc. The amount of data starts to get really, really big.
A report by Deloitte includes two quotes that capture the perceptions of big data really well:
“Big data is the new oil. The companies, governments, and organizations that are able to mine this resource will have an enormous advantage over those that don’t.”
“Big data will generate misinformation and will be manipulated by people or institutions to display the findings they want.”
(Source: The insight economy Big data matters— except when it doesn’t, Deloitte, 2012, available at link above)
As the report says, both the above perceptions are right. The key things about big data is getting information out of it and transforming that information into business knowledge. In other words, like many other things organisations encounter on a regular basis, big data needs to support the organisation’s strategy. This may mean being more competitive, gaining some market knowledge before others or opening up new business channels. Whatever big data might mean for larger (and smaller) organisations, I believe management accountants in particular have a key role in making in useful information/knowledge – after all, we are good at analysing information and filtering out what is relevant.
Related articles
- The future of big data (infographic) (siliconrepublic.com)
Big data and (small) accounting software
Last week I wrote about big data in general. Now I will try to give an example of how accounting software used in small business can be a source of big data, which can ultimately help those same businesses.
Quickbooks is a common accounting software product used in many smaller and medium-sized businesses. Traditionally, Quickbooks was installed on a computer in the organisation, but nowadays it is also available as an online product. In other words, there is a cloud version. According to an article in Forbes in April 2012, as much as 35 million of Intuit (the owners of Quickbooks) customers use online software for accounting and tax returns. With anonymous data on 35 million small businesses, Intuit can obtain quite a lot of information for their own purposes in terms of capturing user needs and developing their products. But they are also using this information to assist their customers. One great example cited in the Forbes article is a Trends feature. With this feature, a business owner can compare their business to average performance trends in the same sector, and even with similarly sized businesses. A comparison of sales, operating margins and payroll cost is possible. This kind of information would be really useful for any small business and typically such a business would have neither the time or resources to obtain such data.
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