Business Smarts for HR Professionals

Business Smarts for HR Professionals

Peter FramptonWEDNESDAY MAY 17th, 2017 8:30 AM Birmingham-Jeferson Convention Complex

© CAI 2017

1. Discover a profound model for thinking about business

2. Powerfully position your people as assets within your business

3. Leave with a new leadership and personal finance tool

Today let’s…

Wax on. Wax off.

Wax on. Wax off.

Wax on. Wax off.

6

It’s not you

7

Financial language is a mess

8

This may surprise you…

Income doesn’t come in

9

Strictly speaking, the dictionary is wrong.

This may surprise you…

10

We accountants don’t agree on whether “income” means

‘revenue’ or ‘profit’

This may surprise you…

11

Income isn’t valuable

This may surprise you…

12

Most accountants can’t explain

what an expense is

This may surprise you…

13

This may surprise you…

Prepaid Expenses aren’t expenses.

Deferred Revenue isn’t revenue.

Net Assets aren’t assets.

14

Accounting is now easy.

Hard Easy

15

Not math

Financial Statements

Balance Sheet Income Statement

Balance Sheet Income Statement

ASSETS

INCOME

LIABILITIES

EQUITY

EXPENSES

ProfitBala

nce

Shee

tIn

com

e St

atem

ent

BaSIS Framework™

Everything is inside a duality

Global Retail, Inc.

Everything is inside a duality

Global Retail, Inc.

Assets$50 000

Everything is inside a duality

Global Retail, Inc.

Assets$50 000

Everything is inside a duality

Global Retail, Inc.

AssetsLiabilities

Equity$50 000

$30 000

$20 000

Everything is inside a duality

Global Retail, Inc.

AssetsLiabilities

EquityValu

able

Obl

igat

ions

$50 000$30 000

$20 000

Everything is inside a duality

Global Retail, Inc.

AssetsLiabilities

EquityValu

able

Obl

igat

ions

$50 000$30 000

$20 000

= +

Everything is inside a duality

Global Retail, Inc.

Valu

able

Obl

igat

ions

=

Uses of Funds Uses of Funds

AssetsLiabilities

Equity$50 000

$30 000

$20 000

+

Dollars vs. Dollarization

Global Retail, Inc.

Valu

able

Obl

igat

ions$50 000

=

Uses of Funds Uses of Funds

$

$

Liabilities30 000

20 000

+Equity

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

ValuableTangible/Intangible

Measurable

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

ValuableTangible/Intangible

Measurable

Obligation to lenders

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

ValuableTangible/Intangible

Measurable

Obligation to lenders

Obligation to owners

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

$30,000Bank LoanCash $30,000↑ ↑

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

$30,000Bank LoanCash $30,000

$20,000

$20,000Issued EqtyCash

↑↑

↑

↑

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

$30,000Bank LoanCash $30,000

$20,000

$20,000Issued EqtyCash

↑↑

↑

↑

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

$30,000Bank LoanCash $30,000

$20,000

$20,000Issued EqtyCashCash

↑↑

↑

↑

↑ $400

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

$30,000Bank LoanCash $30,000

$20,000

$20,000Issued EqtyCashCash

Generated Eqty

↑↑

↑

↑

↑ $400

$400

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

ValuableTangible/Intangible

Measurable

Obligation to lenders

Obligation to owners

$30,000Bank LoanCash $30,000

$20,000

$20,000Issued EqtyCashCash

Generated Eqty

↑↑

↑

↑

↑

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

ValuableTangible/Intangible

Measurable

Obligation to lenders

Obligation to owners

$30,000Bank LoanCash $30,000

$20,000

$20,000Issued EqtyCashCash

Generated Eqty

Value GeneratingActivityVerb conceptSales/Revenue/Income

VGA

↑↑

↑

↑

↑

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

ValuableTangible/Intangible

Measurable

Obligation to lenders

Obligation to owners

$30,000Bank LoanCash $30,000

$20,000

$20,000Issued EqtyCashCash

Generated Eqty

Value GeneratingActivityVerb conceptSales/Revenue/Income

VGA

Value SacrificingActivity

Very concept

VSA

↑↑

↑

↑

↑

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Uses Of Funds Of Funds

Bala

nce

Shee

tIn

com

e St

atem

ent

ValuableTangible/Intangible

Measurable

Obligation to lenders

Obligation to owners

$30,000Bank LoanCash $30,000

$20,000

$20,000Issued EqtyCashCash

Generated Eqty

$700

$700Consulting

↑↑

↑

↑

↑

Value GeneratingActivityVGA

Value SacrificingActivityVSA

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Bala

nce

Shee

tIn

com

e St

atem

ent

$30,000Bank LoanCash $30,000

$20,000

$20,000Issued EqtyCash

400

$700Cash/AR

$700Consulting$300Travel

$300Cash

ValuableTangible/Intangible

Measurable

Obligation to lenders

Obligation to owners

Generated Eqty

Uses Of Funds Of Funds

↑↑

↑

↑

↑

↑ ↑

↓

Value GeneratingActivityVGA

Value SacrificingActivityVSA

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Inco

me

Stat

emen

t

Valuable

Profit

VSA

Obligation to lender

Obligationto ownerBa

lanc

e Sh

eet

VGA

Only five boxes.

Practice?

Put a foundation in place…

… to build a solid building

The Value Cycle of business

LiabilitiesAssets

Equity

IncomeExpenses

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Inco

me

Stat

emen

t

Your assets

Saving

Your consumption

Your debts

Your net worth

Bala

nce

Shee

t

Your personal finances

Your earning

Valuable

Obligations to creditors

Obligations to owners

1

3

2

Value Generation Activity

VSA to make sales

VSA to run the operation

VSA to finance the business

Opening retained earningsClosing retained earnings 76,869

39,1919

VSA to run the country

Net VGA during period

Cumulative value retained

1,418,882

4

6

5

Business Narrative

At December 31st 2018, Global had assets totaling (1)______________ in use for the purpose of generating a return for the owners.

Global partally funded those assets with (2)_____________ of debt.

The remaining portion of the assets in the amount of (3)___________ was funded by Global’s shareholders. In 2018, Global generated value for its

shareholders by generating (4)______________ in sales revenue. In order to

deliver those sales, Global consumed value by utilizing (5)_______________ of

resources as expenses ...resulting in net value generated of (6)__________ .

$1,093,428

$1,418,882

Google’s Missing Assets

LiabilitiesAssets

Equity

Google, Inc.

IncomeExpenses

$170bn$30bn

$140bn $660bn

Market Capitalization

Measuredassets only ?

1. Discover a profound model for thinking about business“There are just two things happening in a business: value is being generated, and value is being destroyed”

2. Powerfully position your people as assets within your business“Part of the missing $520bn”

3. Leave with a new leadership (and personal finance) tool

BaSIS Framework communication model + download

We set out to…

Text ‘ALSHRM’ to 82888 for an ExcelPersonal Finance BaSIS Framework

@coloraccounting

Recycle highlighters

Thank you for being great !!

1

2

3

📬📬 peter@coloraccounting.com(202) 413 7227📞📞

Questions?

Three timing scenarios - EARNING

1.Receipt before

2.Same time receipt

3.Receipt later

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITYCash $700

700Profit

↑

$700Revenue ↑

Same time receipt

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Profit

Your Organization, Inc.

Receipt later?

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITYAccountReceivable $700

700Profit

↑

$700Revenue ↑

Your Organization, Inc.

Receipt later - earning

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Cash $700700Profit

↑

$700Account Receivable

↑

Your Organization, Inc.

Receipt later – cash received

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Profit

Your Organization, Inc.

Receipt before?

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITYCash $700

0

$700Def. Revenue

Profit

↑↑

Your Organization, Inc.

Receipt before

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Bala

nce

Shee

tIn

com

e St

atem

ent

700

Def. Revenue

Profit

$700Revenue ↑

$700

↑

Receipt before – earning

Cash $700

1.Pre-payment

2.Same time payment

3.Post-payment

Three timing scenarios - EXPENSE

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITYCash

$300

-300Profit

↑

Your Organization, Inc.

Same time expense

Travel

$300

↑

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Profit

Your Organization, Inc.

Payment later?

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Acc. Payable

$300

-300Profit

↑

Your Organization, Inc.

Payment later - expense

Travel

$300↑

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Acc. Payable$300

Profit

↑

Your Organization, Inc.

Payment later – cash paid

Cash $300

↑

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Profit

Your Organization, Inc.

Paid before?

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITYCash

$300 0Profit↑

Your Organization, Inc.

Paid before – cash paid

Prepaid Expense

$300

↑

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Expense $300

-300Profit

↑

Your Organization, Inc.

Paid before - expense

Prepaid Expense

$300

↑

< 43

… continue

< 43

Debit accounts Credit accounts

Debiting DebitingCrediting Crediting

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Bala

nce

Shee

tIn

com

e St

atem

ent

Uses Of Funds Of Funds

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

EQUITY

Bala

nce

Shee

tIn

com

e St

atem

ent

Uses Of Funds Of Funds

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

Bala

nce

Shee

tIn

com

e St

atem

ent

Uses Of Funds Of Funds

EQUITY

Your Organization, Inc.

ASSETS

INCOME

LIABILITIES

EXPENSES

Bala

nce

Shee

tIn

com

e St

atem

ent

Uses Of Funds Of Funds

The Budgeting Cycle

LiabilitiesAssets

Equity

IncomeExpenses