Keeping Track of Your Business

Keeping track of your business is no different in Japan and QuickBooks is pretty popular here just like in the US. The best part of traveling is I found this site, which offers online QuickBooks training videos that I can watch overseas. Accounting is keeping track of all the monetary details of your busi­ness. All the money you have, spend, receive, or owe can be divided into six main categories. Money you have or are owed falls into categories called income, current assets, fixed assets, or equity; money you spend or owe is divided into categories called expenses or liabilities.

If accounting was just a matter of assigning all of your trans­actions to one of these six categories, of course, your ten-year-old could handle it for you. But it’s not that simple, which is why most people use computers to take care of it. Within each of these six cat­egories are dozens of subcategories that specifically describe each of your transactions. An accounting program makes it much easier to set up all those subcategories and make sure every one of your finan­cial details gets assigned to the right one.

Every time you pay an employee, close a sale, or make a bank deposit or a loan payment, that’s a detail that has to be recorded. For example, you have to track telephone expenses as such within the expenses category, or else you’ll have no idea how much you’re spending on phone bills. And you have to track sales taxes as such within the liabilities category, or else you won’t know how much to send the state government each month or each quarter.

It’s as if each category is a file drawer and each subcategory is a folder inside one of those drawers. Whenever you write a check, spend money, lick a stamp, or make a phone call, a record for each of these expenses needs to be put into the proper folder inside your expenses drawer. Each time you sell a widget, fill a tooth, or install a bathtub, you receive money for this, and a record needs to be put in the proper folder in your income drawer. If you borrow money through a mortgage or a small business loan, or if you collect sales tax from customers, you must file a record in the right folder in your liabilities drawer. And if you borrow cash or buy property, the mar­ket value of the property or cash is added to a folder in one of your assets drawers. As you make payments to your mortgage company, you reduce the amount owed in the mortgage record in the liabili­ties drawer, and you increase the value of the building in the fixed assets drawer.

All this sorting and tracking is a pain, which is why there’s such a robust market for computerized accounting programs. They help you with all aspects of your accounting in several ways:

• They organize every transaction in the proper folder in the proper drawer. In an accounting system, these categories are called a chart of accounts.

• They capture this information by allowing you to handle the transactions or activities related to your accounting, such as writing checks, making deposits, decreasing a liability, or increasing the value of an asset.

• They make the information you collect and categorize readily available in reports for your tax collector, your investors, your accountant, or yourself.

Most accounting programs, including QuickBooks, are organized by these three basic aspects of accounting: a chart of accounts, activities, and reports. QuickBooks is no different. But before we get into QuickBooks’ way of handling these basic accounting chores, we recommend checking out these some QuickBooks training videos.

The Accounting Profession is Different in Japan

As we mentioned, the role of financial accounting  in Japanese organizations is quite different from the accounting typically found in American companies. Japanese accounting personnel play a much more proactive role in product target costing, facilitating the budgeting process, and in working with their counterparts than do the usual accounting personnel in the U.S.  For example, Nissan, which is a $50-billion business, has approximately 500 accountants in Japan. A full 200 of them are committed to the approximately 20 new-model planning teams working primarily in the target costing area. As we said earlier, the planning and budgeting process is much quicker than in mostU.S.companies. Finance and accounting plays a central role in leading and facilitating the six-month budgets. Most of the companies with which we are familiar in Japan have at least as many, and frequently more, accountants doing what we would classify as management accounting instead of financial accounting. This situation is very different from the one in most U.S.companies today.

In summary, some of the characteristics that might be applied to finance and accounting in Japan are participatory, that is, working with other parts of the business in a partnership arrangement as contrasted to a “command and control” orientation; cost/production-oriented, that is, focused primarily on the design and production cycle, designing costs out of a product and assuring that they stay out rather than spending a great deal of time on financial planning and analysis; visible, that is, working in the business rather than for the business and focused across the business ultimately to satisfy customers as contrasted to up the business to satisfy more senior levels of management.

It would appear that the combination of characteristics described above has a clear impact on the effectiveness and the efficiency of Japanese finance and accounting organizations. From the standpoint of effectiveness, Japanese accountants are very involved in key decision aspects of their businesses such as product planning and costing, cost control and reduction, and overall business planning, budgeting, and results. They achieve this effectiveness without the deluge of reports that burdens so manyU.S.companies. Reporting is, to a great extent, done locally, closest to where it will have the maximum benefit. Finance and accounting does not produce a blizzard of reports comparing actual results with budgets and transmitting them throughout the organization, nor is there the constant harassment for explanations of deviations.

Our calculations suggest that Japanese finance staffs are enormously productive. Typically they have staffs which, in the United States, would put them among U.S. corporations with the best practices while, at the same time, they seem to be doing a number of more proactive activities than even the “best practices” companies. Examples include involvement with product target costing, managing the budget process, and working with factories to reduce costs meaningfully.

Our last observation is that the distribution of effort between proactive accounting and historical accounting is strongly skewed in favor ofJapan.