Crunching Numbers

There is a trend of having accountants run fleets and maintenance departments. The logic is that experts in money and accounts can make the cuts that fleet managers cannot. To some extent this is true; the accountants come to the fleet with a fresh vision and with fewer (and different) sacred cows. Their priorities are different and they don't have the long-term relationships to cloud their view. The fleet managers may have become complacent or even resigned and there by ineffective.

Consider the difference between lifetime fleet managers running a fleet versus accountants running a fleet. What is the difference of a money specialist running a fleet versus a fleet specialist running a fleet?

What would you expect?

You would expect that the money expert would increase the efficiency, utility and effectiveness of the money assets. You would expect inventories to be cleaned up, cash to used more effectively, budget discipline improved and smarter use of banks, debt and equity. He or she would certainly be able to wrest a few (or even a lot of) dollars out of the operation. The value of this impact should not be minimized.

The accountant's spread sheets with dollars spent, revenue, depreciation and hundreds of other items represent a model of the business. A good model is very useful and gives you power over the reality it represents. Let's talk a little about models.

Didn't you love the really good die-cast automotive models when you were a child? The ones that the metal doors opened, the lights worked. When you opened the hood there was a real looking engine. Many children had their imagination stirred by good models. Girls had their own models. Girls loved dolls. They were pretty good models of babies, other girls or even grown-ups. While children loved their models there was no confusion in their mind that the model was not the real thing. Most children also realized (if they admitted it or not) that expertise with the model (such as with a baby doll) did not immediately qualify one with a real baby.

Merriam Webster gives us two definitions of the word model that apply to the relationship between the accounting for a business and the business itself. The first is "a description or analogy used to help visualize something (as an atom) that cannot be directly observed."

We use accounting models of the business to help us see how the business works. A business cannot be seen itself but we can manipulate the model and see what happens. One example is called a pro forma statement. According to Wikipedia in business, a pro forma document is one provided in advance of an actual transaction. Such a document serves as a model for the actual documents of the transaction. For example, when a new corporation is envisioned, its founders may prepare a business plan containing pro forma financial statements, such as projected cash flows and income statements.

For the second definition, and how it relates to your fleet business, read the continuation of "Crunching Numbers" in the December issue of Fleet Maintenance.

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