Visual training: the essential of business

Having fun and learning the fundamental principles of accountancy are rarely concepts which appear in the same sentence.

Certainly my early days at the tutors were far from fun.

Exasperation on both sides was the norm. The only fun came when one tutor taught an entire hour of tax law while impersonating WC Fields, the misanthropic Hollywood comedian of the 1930s.That tutor went on to become chairman of the Conservative party.

Part of the problem in those early days was that we were off and running with much more interesting things like corporate fraud or detecting stock irregularities long before we had got the hang of the underlying accounting by which a company stands or falls.

As Robert Bittlestone, chairman of consultants Metapraxis, was telling us the other day it is rather like learning to ride a bicycle.

When a child first looks at a bicycle and thinks about the theory of riding it the whole concept seems impossible. But once the skill has been gained not a single further thought is given as to how it is done.

If only, thought Bittlestone, a similar liberating step could be made in accounting, then business life would become much more fulfilling and less fraught with dangers.

If the underlying principles could be learned through some visualisation process then the leap could be made. And from then on in, with an instinctive understanding of the accounting essentials of business in their minds, accountants could simply concentrate on strategy rather than lurching from one frantic burst of fire-fighting to another.

Bittlestone and Metapraxis are experts in the field of visualisation and so they set about producing a solution.

And at the end of February, in conjunction with management accountancy body CIMA and the British Computer Society, they launched the idea onto an audience of sceptical journalists, grizzled old businessmen, and bright young trainees.

The system is known as the Business Flight Simulator.

Put simply it is an online game which simulates a business as it runs. It comes across as a complex plumbing diagram, the sort of thing which would diagnose where your central heating had broken down. But instead it is the cash coursing - or not coursing - through the business, which is the key.

The company simulation can run at any speed you like and through years of operations.

And it portrays the relationship between cash at bank, debtors and rate of receipts, creditors and payment periods, fixed assets, stock, investments, bank loans, advertising, staff numbers, undistributed profits, share capital, depreciation, capital spending and so on.

The graphs alongside show operating profit, or the state of the profit and loss account, balance sheet and, most important of all, cash flow as it unfolds.

Initially, it is slightly baffling. But it is easier to learn lessons visually than from a page.

As Bittlestone said: ‘A visual approach using business simulation techniques quickly gives managers an intuitive understanding of the very simple relationship that exists between reported profits, actual measured cash flows and the assumptions about value that are attached to business assets.

This basic relationship is at the heart of all business and it has been the crux of all the financial collapses we have experienced in recent years.’

And it is this emphasis on cash which Bittlestone felt was the big advantage to come out of the intuitive approach.

The paradox of companies showing record profits and then going bust would become less of a paradox if managers gained an intuitive understanding of how things worked.

Traditionally, the basics of accounting have been left to the accountants. Managers from other disciplines dutifully go on ‘finance for non-financial staff’ courses.

But it tends not to stick. And the growing complexity of financial reporting has given non-accountants in companies an even bigger excuse for not trying to understand how it all works. If it is complex to the experts, then just leave it to the experts, is the easy and increasingly common way out.

But what Bittlestone wants to see is what he described as ‘democratising the very simple cash principles of the corner shop’.

To that end he sees a critical mass being achieved within companies. Not only would trainee accountants use the game between themselves or as part of formal training, but it would also catch on among other people within the company who are far from the accountancy career route.

The real change would come if enough people across a business understood the fundamentals of accounting in an intuitive way. It would create a revolution where everyone understood the nut and bolts and could spend their entire business lives looking to the horizons rather than constantly stumbling over the details at their feet.

Come fly with me

The Business Flight Simulator enables users to create a company from scratch and if it goes bankrupt, to learn from that mistake and start again - all within the space of ten minutes. The simulator runs on the internet and can be applied to retailing, manufacturing, banking, insurance, property and other business sectors. Both individual and multi-player versions are supported, enabling players to compete with each other internationally by gaining market share.

The simulator emphasises the continuing difference between profit and cash flow, helping players to understand this crucial distinction from an intuitive standpoint.

Metapraxis chairman Robert Bittlestone said that it was surprising that modern computer technology had not already been applied in this way to help to achieve a fundamental understanding of company finances.

‘A visual approach using business simulation techniques quickly gives man agers ­ and anybody else who is interested ­ an intuitive understanding of the very simple relationship that exists between reported profits, actual measured cash flows and the assumptions about value that are attached to business assets. This basic relationship is at the heart of all business and it has been the crux of all the financial collapses we have experienced in recent years.’

This article originally appeared in the April edition of Financial Director

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