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AtoBC, The Anti-Loss Method
Di Dutch Metodo
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56 pagine
41 minuti
Descrizione
Eight hundred years ago the Dutch Guilds developed a method to take control over Company’s losses. They didn’t know what caused them, just how to handle them. By the 16th century the Netherlands was rich enough to fight off the Spanish empire in the Eighty Years' War, and simultaneous fight off the English in four wars.
After the demise of the Guilds, family businesses that descended from the Guilds kept using the method. In changing economic circumstances, it was dismissed in 1970. In 1978 the only place the method was still used was in trade school books. Just one of those strange things kids must learn, but seem to have no real connection to the world.
By 1975 Dutch companies started to run into losses again. Without a method to take control of losses, companies make shocking, costly mistakes that only serve to increase their losses.
We have rediscovered the method and developed it for use by modern companies and governments.
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AtoBC, The Anti-Loss Method - Dutch Metodo
AtoBC
The Anti-Loss Method
Dutch Metodo
Copyright © 2017 Dutch Metodo
All rights reserved.
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Contents
1. The cause of losses
2. The mistakes
3. The solution
4. Losing the profit and loss general ledger account
5. Losses and budget deficits
6. The effects of cut-backs
7. Surpluses and shortages
8. Making money
9. The nature of the disabilities
The cause of losses
The cause of losses is actually quite simple. People make mistakes. When an employee forgets to switch off the heating at home, his fixed expenses will increase. When he makes a mistake at work, a product won't be sold.
An additional difficulty is that the current business accounting system contains a flaw that makes it impossible to book the fact that expected revenue wasn't received.
In fact, it's amazing that companies can function at all without incurring losses.
The years of plenty
Companies can function for three to nine years without visible signs of losses. As long as a company’s sales market grows, it can use 'non-budgeted income' to cover 'non-budgeted costs'.
A company that sells a traditional product requires two years to attract the unsatisfied customers of its competitors. A company that sells an innovative product, requires eight years to convince potential customers of the value of that product. By the next financial year-end, the company will book a loss.
An accounting problem
Due to mistakes and accidents during the production or sales process, products sometimes become damaged. These products cannot be sold, so the revenue they would have generated, cannot be accounted for. At the end of the year, when the books are balanced, the revenue falls behind the expenses. But the accounting doesn't contain information as to what happened to the missing money. As a result, a business runs a loss of 2 percent of the sales on average.
A 2 percent loss is exactly what's needed to ensure the company will be unable to pay its salaries in December. So, it quickly tries to increase its income, or reduce costs. That's where things go wrong.
Companies with losses, make three major mistakes.
The mistakes
Not preparing a cost-benefit analysis
In an attempt to quickly reduce costs, companies forget to do an cost-benefit analysis before they purchase cheaper raw materials or tools. Just because a product is cheaper to buy, doesn't always mean it's also cheaper to use.
One of the first cuts companies often implement, is replacing metal teaspoons with disposable teaspoons. Stainless steel teaspoons cost 2 euros each and that of disposable costs 0.02 euros each. So, they think disposable teaspoons will be cheaper. That's true, but only if the employees drink coffee or tea just once in their life.
Take a company who have thirty employees working there who all drink coffee, all year round, five days a week,
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