Wednesday, April 30, 2008

Cost, price and value

Dear Colleagues

The three most important numbers about almost anything are cost, price and value.

With a deep understanding of cost, price and value it is possible to explain much of the behavior of the economy ... and to understand why things are progressing or not.

Cost is a useful metric for productivity. Productivity goes up and it is likely that cost goes down.

Price and cost determine profit ... and this is the main driver of decisions in the for profit corporate space.

Value and cost determine value adding for society ... for the community.

Where price is positioned relative to cost and to value determines what proportion of the value adding that is captured by the corporate entity and that which remains for the consumer and public external to the corporate entity.

By careful presentation of price, it is possible for the corporate entity to get more of the value for itself than there is value ... which is what happened in, for example, the sub-prime mortgage debacle.

Corporate GAAP accounting is mainly about cost and price. Community Impact Accountancy (CIA) is a system that has both price and value in the analysis framework so that there can be a focus on performance in terms of community rather than just in terms of the corporate entity.

For more information please contact me.


Peter Burgess

Wednesday, April 16, 2008

Change of name

Dear Colleagues

The system of Community Impact Accountancy that has been developed by Tr-Ac-Net started life as Social Benefit Accountancy. Its edevelopment was driven, in some part, by the interest of Dr. Muhammad Yunus in deploying a system of accountancy that would be relevant for a "Social Business" and facilitate the creation of a stock market for social business.

Some of the Tr-Ac-Net history also makes such a system of interest. It has been very clear for many years that the corporate profit maximization model was effective from the view of the corporation and its stockholders, and maybe its seniot management, but that the impact on other stakeholders was being ignored.

While corporate social responsibility moves a bit in the direction of taking other stakeholders into consideration, it is only a small step and total inadequate as a universal tool for society or the public to hold corporate entities accountable for actions that are detrimental to society.

Any observations about this name change would be welcome.


Peter Burgess