Another airline tax? Get lost!

This is a simulcast with duncan's diurnal diatribe Read this article and then my comments below http://www.ft.com/cms/s/0/8d2ca858-92f2-11e1-b6e2-00144feab49a.html#axzz1tFw6P9cn --oo0oo-- This is a joke, yes? Cameron agrees so that's it? The reality is that politicians these days are so undereducated in the ways of the practicalities of running a country that all they can think about is to increase taxes and hope that a problem will then be solved. The reality is that this is a matter of planning, forecasting and management. Is it a surprise, for example, that today, an Emirates A380 will arrive from Dubai at Heathrow (and Manchester for that matter) and another one will arrive from Singapore? Is it also a surprise that there may be more than 500 people on each plane? Is it also a surprise that this happens every day of the year? The point is quite clear, airlines have their timetables and their slots at our airports. We all know all of this. Now, just take another step or two from here: on average, how many Brits are on these planes?; how many are from the EU and so on?; how many are from the rest of the world ... la la la. Passenger arrival statistics are a matter of fact and have almost certainly been analysed ... haven't they? Finally, we get the the nub of the matter: the Border Agency knows all of the above much better than I do but in the end it's a matter of staffing and management since the plans and forecasts have largely been taken care of. Like other people on this thread, I travel a lot and would resent most strongly if ever more taxes were loaded onto passengers. For example, a recent flight: cost of ticket £42, cost of taxes and other charges on that ticket £121. Easy target or what? Duncan Williamson

Just Eat

Here's a peculiar thing. I came across an article in the FT yesterday on a company called Just Eat. The essence of the story is that "Just-Eat, an online takeaway site, has raised $64m from private equity group Vitruvian Partners and other investors to help it gobble up smaller rivals, in Europe’s largest ecommerce fundraising yet this year." What's so good about that? I had never heard of the company! So I did a search for them and found that they are here in Halifax too. Well, they are everywhere: an online booking service. Not just a link to the local pizza shed but a restaurant's entire menu is online, you choose from it then Just Eat sends a message to the restaurant which then fulfills your order. Good idea and I am not being paid to write this: I am just surprised that I had never heard of it before! I am not sure if you need a subscription to the FT to read it but see the article Just-Eat raises $64m for acquisitions By Tim Bradshaw, Digital Media Correspondent at http://www.ft.com/cms/s/0/6c805dd2-9097-11e1-8adc-00144feab49a.html#axzz1tFw6P9cn Duncan Williamson

I really don't like this

The other day I asked a friend of mine a simple question: where does he buy his bow ties? Many years ago I went through a phase of wearing a bow tie until one day someone came up to me and said, "And my next trick is ..." I thought that was a fatuous thing to say but shortly afterwards I stopped wearing them. Then I had a conversation with someone a few works ago and she sent me to a web site where there was a very nice bow tie waiting to be bought. I bought that bow tie and have started to wear it ... Following advice from my friend I went to three web sites this week to look for other bow ties. Some really nice ties on offer too. Five minutes ago I clicked on a link in an email message and when I got to the page I wanted to read, there, top left hand corner of the page, was an advertisement for one of the three bow tie web sites I went to the other day. I don't like that. I know about cookies and so on. I know that google monitors my messages for advertising purposes and so on. These days, though, we are being monitored in a google like way outside our email as far as I can see. For similar reasons I stopped using Facebook and twitter recently: apart from the waste of time these sites encourage, they are far too intrusive now. Everywhere we go and everything we do has a facebook and twitter link. Now we are being hounded even beyond that. What can we do about this? Refuse to accept cookies? Can't do that unless you want to input some things over and over again ... In the end then, be aware of what is happening and watch out for the insidious. Someone, somewhere has made 5 pence out of my innocent click through, haven't they? Which takes me to another point: knowing the way google works, I NEVER click through any of their sponsored ads. NEVER. If I see a site that interests me I will copy and type the address of that site rather than click through it. Do I begrudge google their money? Not at all but it's another way in which the modern world is paying another tax without realising (I am sure that is true, by the way) it and without being able to control it. Duncan Williamson

Death wish

Anyone know why this worm might have been attracted to my hall only to get there and die?

Several worms of this type have done this over the last two years or so.

DW

New HR book from Tony Miller

There are at least two reasons for buying this newly published book: firstly, it's very practical and it's been written by a true master of his craft, DrTony Miller.

The second reason to buy is that the tables, charts and numerical analysis were driven by yours truly via Microsoft Excel.

Here's the link to Tony's site where you can buy the book.
http://www.tony-miller.com/the-new-hr.php

Duncan Williamson

Budgeting: Practical Problem

In the Gulf Times newspaper last week there was an article relating to the State budget for Qatar for 2011. What they said was that the budget for that year had been based on an average crude oil price of $55 per barrel. Over the year the average price of crude oil on the commodities markets was $112.83 per barrel. Imagine the implications for a company, let alone a country, of one's selling prices being around 105% greater than one had previously budgeted. I understand from a conversation today that Saudi Arabia's State budget was based on a crude oil price of $74 for 2011 ... the same applies to them as to Qatar except that the difference between actual and budget is not so high. Just goes to show that the Beyond Budgeting Round Table people have made some fair points in their time! Duncan Williamson

Value Chain Analysis: beyond Porter

For a few years now I have been required to discuss Value Chain Analysis. Like most people I start with Michael Porter's view of the value chain. However, what's wrong with Porter's analysis is that it concentrates only on the organisation.

There is a further analysis to add to Porter coming from John Shank and Vijay Govindarajan.

I have prepared a detailed review of Porter and Shank & Govindarajans' analyses and they can be yours free of charge. Just write to me at duncan@duncanwil.co.uk and put value chain in the subject and I will send you a PDF file that begins as follows:

--oo0oo--

Value Chain Analysis

Duncan Williamson

This article is concerned with value chain analysis and you should find it useful for you as you consider ways of enhancing the services that you provide to your clients. An understanding both of value added and analysis and value chain analysis will put you ahead of many accountants for whom these skills are elusive!

Having defined the term value chain, we will take a look at a series of examples that will illustrate the need for such analysis. Value chain analysis is best used when analysing a company’s competitive advantage, or lack of it. Michael E Porter suggests using the value chain to separate the company's activities in the value chain into detailed discrete activities. When broken down to a sufficient level of detail, the relative performance of a company can be determined. (Have et al)

Shank and Govindarajan provide fascinating insights into value chain analysis that take Porter’s seminal ideas a stage further. This article explores some aspects of value chain analysis using data taken from the annual reports and accounts of British Airways and easyJet.

The article starts, however, by distinguishing value chain analysis from value added analysis.

The following are the section headings I have used in the rest of the paper:

• Value Added v Value Chain Analysis
• Identifying Value Activities
• The Value Chain
• Value Chain Framework
• Strategic Implications
• Supplier Linkages
• Beneficial Linkages
• How Value Chain Analysis Works
• Value Chain Case Study: airlines
• easyJet
• British Airways
• Conclusions
• References

Duncan Williamson

Opportunities in Uganda

I have just spent 8 - 9 days in Northern Uganda and have seen that there are many business opportunities throughout the country. Do NOT write to me and ask me for a job, however: what I mean is that there are many gaps in the labour market and they need to be filled. Talk to any businessman you know and get him to invest in Uganda: there are examples of where investment on a massive scale has taken place so why not think a bit smaller and do your bit? Duncan Williamson

Peter Cochrane's Business Philosophy

I heard Dr Peter Cochrane speaking on BBC Radio 4's Today programme just now and at first I was irritated by his Americanised language but once I had explored his web site I thought I would share his business philosophy with you. I think Dr Cochrane would agree that his philosophy is not entirely his own but it is still well worth sharing:

"Another three failures followed until I learned a most valuable series of lessons:

Make sure every single facet of any business you wish start is in place and fit for purpose: technology, design, product, plant, production, market, marketing, sales, delivery, support, aftercare, people, finance etc must all be 100% at the same time. If any one element fails then so does the whole.

• Never assume people understand 100% anything you say.
• Never assume people do anything 100% you ask of them.
• Never believe or trust a customer 100%.
• Never believe or trust a financier 100%.
• Never neglect (4) & (5): they both need care and attention.
• Identify all your competitors: and their state of play.
• Look out for oblique threats from outside your immediate sector.
• Don't be blinded by enthusiasm for a technology or idea - especially if it is yours.
• Don't let pride get in the way.
• It is never too late to shout stop!
• It is never to late to rip it all up and start again.

By late 1998 I had learned a lot through the school of hard knocks, losing my own money; and the companies listed below started to emerge as the cream of the crop from a diverse number of directions. Things started to go right at last and at last I coined Cochrane's Law of start ups, as follows:

Any new company in which I participate and invest enjoys a success that is inversely proportional to my involvement.

This turns out to be an obvious and a self fulfilling law in that if I don't pay attention to the above, then I spend all my days trying to engineer a fix, or mounting a defence, later.

If I get it all right from the start, then I have to do almost nothing, the business largely looks after itself."
See: http://www.cochrane.org.uk/nav/start-up-experience/ 

DW

Back Home Again!

I returned from my latest trip but not in the rudest of health. I have fallen victim to air conditioning and I am hot and weak! I slept all morning and have come back to bed already ... It's only 18:18 but I feel comfortable with my bedside cabinet full of fluids.

DW

Do it right first time!

I went to the internet last night to download a large database of accounting data. I found the data and duly downloaded the data.

When I downloaded the data, it didn't paste in Excel very nicely. No problem, I can cope with that and did so with only a little difficulty. The two graphics below show the before and after. For the before work sheet I needed to copy from the web page and then Paste Special, Text but even so the result was a bit of a mess!

I moved things around and got the following, tidy result:

However, part of the way through my initial analysis of the data I noticed a feature of the data that I hadn't spotted before. I was torn: do I go through each of the eight thousand cells or do I go back to the web site and download the data and start again ... after all, I had cleaned the original database without copying and protecting the original work sheet.

Cut a long story short, I wasted some time last night with the first option, inspecting each of the eight thousand cells. This morning I had a rethink, went back to the web site, downloaded the data again and cleaned the data again ... the better solution.

The Moral of the Story

When downloading and copying data, keep the original data safe and unchanged somewhere: the father and son principle.

Duncan Williamson

Top Down Mathematics, Bottom up Reality

Please take a look at this lengthy article from today's Financial Times. The article concerns the quantitative financial model building taking place in the engineering faculty at University College London. I find it a little odd that this is taking place in the engineering faculty but not surprised that it is happening.


Years ago I wish I had followed the thought that I had in which I believed that mathematicians, physicists and other scientists and engineers had a lot to offer the accounting and economics profession. I have been proven right and in this article there is a telling insight into what I believed but did not know. 


"Mirghaemi was hired by BNP Paribas last summer. A few months later, her boss – a trader for 37 years – mentioned that he could never work out the simultaneous price and position of a trade. On the spot, Mirghaemi wrote down a cosine formula from physics useful for measuring electromagnetic waves. “He was just looking at it,” she said. Mirghaemi emphasised her respect for her seniors at the bank but she said that she felt different. “I think I come from the new generation,” she said, “looking at the finance, the economic, the engineering, the computing altogether.”"


The article can be found here and forgive me if you have to subscribe to read it: http://www.ft.com/cms/s/2/0664cd92-6277-11e1-872e-00144feabdc0.html#axzz1o3Mb7dBx

Duncan Williamson

Spreadsheet Ideas

Trip over to my Excel blog to see two new posts. Long but very useful explanations:

1 Building a population pyramid to compare business data
2 Interest based functions using Excel's built in functions

You need them both!

http://excel2007master.com/

Duncan Williamson

You WILL pay ... I WILL NOT!

Manchester Airport has been asking passengers to put a refundable one Pound coin in a slot to allow them to use their baggage trolleys for quite a while now. I have never used that "service" as I come home and quite often do not have such a coin with me. As I depart I found it very inconvenient to try to get rid of the trolley and get my Pound back: so I stopped doing it.

No great problem.

I just had a newsletter from Manchester Airport that tells me that from April this year there are going to be brand  new trolleys for us ... they are investing one million Pounds in them ... the Pound or two Euro coin will now be non refundable ... they will have GPS tracking in them!

They say

To continue making multi million pound investments in the airport when the cost of air fares are reducing, means that airports can't continue to provide services like trolleys for free. We know that charging for trolleys will not be a popular decision. This is why we are following the advice of consumer groups ...

http://www.manchesterairport.co.uk/manweb.nsf/Content/trolleys

Which consumer groups? No one asked me and I use the place more than most people!! Air fares are reducing are they: I'd like to see their evidence for that!

I will be independent of Manchester Airport's RyanAir style money making scheme.

Duncan Williamson

Swings and Roundabouts

I checked into an hotel from one of my favourite chains and was immediately disappointed. The check in experience was dreadful. The towels are grey and old. There was just one bar of soap in the bathroom (and yes, there is a bath in there!). And a few other annoyances. I was going to rate them as poor: excellent hotel with three star service.

Then bit by bit the staff have changed my opinion: chamberpersons couldn't be better, the egg chef at breakfast is excellent, the breakfast waiting staff are very good. Finally, I just went for a sandwich and not only did I get a brilliant veggie sandwich but one of the waitresses came and made me an offer of a free cake! I accepted and when THEY came I was overwhelmed: the carrot cake was really very good. I could only eat three of the five they gave me ... all small, by the way!

Well done the staff at the Sheraton Deira Dubai

Duncan Williamson

Cost Accounting ... YES!

I got a fascinating message by email today that I want to share with you all. At the end of the message is my reply. See what you think!

Message TO me:

Dear, Mr. Williamson!

I have stumbled upon your homepage via Google search. The reason why I have done that is because I am working on the Thesis. It is dealing with the problem of maximizing the profit of a company X, within a concern Y.

The thing is that I work for a manufacturing company, that is a producer of a household products. And I would like to use Excel modelling to help our managers with a sensible peace of advice, about maximizing profits. The fact that we are part of a bigger concern and deal with only production puts some limitations e.g. our transfer price is fixed. We sell all of the finished goods to a distribution center (so we have only one client) and the profit would be everything we produce cheaper than a transfer price. The problem I see is that our cost price was calculated many years ago and it utilizes outdated principle, when naked price of labor and materials is increased with a fixed percentage of transportation costs, marketing costs etc. I find it very disturbing to read such a cost price, and definition of additional expenses with a fixed rate percentage might be misleading for the management.

The question is can you please advice some good reading? I might say that all of the articles (like "Linear Programming and Excel's Solver") that could be found on your website are quite good, but nothing new to me, as this was a part of financial class at the college I study in. Any book with some insights and tools how to make a company more profitable would be of a use!

The second question is that ok, if I build a model for a whole factory this would be nice, but it does not cut our costs. If I would come up with a proposal how to economy on let's say painting (use thinner paint job for the products, with same level of quality) would be more useful, but the model itself does no tell you where to "tighten the screw". One of the solutions would be to make economies on taxes. With our existing cost price calculation we make around ~12% profits of net sales. And we should pay a company income tax. If we can build a costprice that would lead us to a 3-5% profit, we would economy a huge amount in income tax, and we could decide to make profit in an other unit (we are a concern and might utilise our Hong Kong branch where CIT is very low). But this is the only opportunity I see for company X to maximize it's profit within concern Y. Maybe you can advice me something better?

Any information would be helpful. And I would like you to thank you for the presentation found on your website :Cost Model Building: a simple example" because it explains cost model building in plain words and makes it easy to understand. I might use your ideas for a presentation if I write a good thesis.

Best regards,
A M

Message FROM me:

Thanks for your very interesting message A.

What you have found is typical of the situation in many companies and probably all over the world.

The problem is the lazy accountant who cannot and does not understand where he is and what his company is doing. So it's good to hear that you want to break the mould.

As for reading, I think the best advice is for you to read and consider the differences between traditional cost accounting that you seem to be describing and the more modern alternatives such as activity based costing, time driven activity based costing and even things like the balanced scorecard and so on. I think you already know about these things but if you think carefully about how you can apply them in your own situation you will benefit a great deal.

Again I think you already appreciate that you NEED to understand all products and processes at your place of work before you can solve the problems you have outlined to me. Your biggest ally, by the way, is probably not in your accountant's office but in the factory. Your engineers, production management, stock controllers ... they are most likely the people who are of most benefit to you: learn what they know and it will be a good start for you.

As for saving costs, I would take a different approach: you MIGHT convince someone to thin down the paint, to find alternative suppliers, cheaper labour and so on but think this way. By generating a proper, more rational and scientific cost accounting system, you will demonstrate and reveal the reality of the situation your company is in. If you can then convince your management that what you have prepared really is valuable then they would be stupid to ignore your findings. Your new costs per unit and so on, your departmental cost schedules and all of the other value adding material you will be providing will be an eye opener for them that they cannot resist!

I have worked with people who think that cost accounting is nonsense: that is until I show them that I understand what they do and what they need; I then show them my product cost model and what it can do for them. Then they wake up! Very satisfying!

I hope you find that useful and would love to hear more about your products and services and where in the world you are!

Best wishes

Duncan Williamson

The Bankers Bone Us

Thanks to PK Munro for the inspiration for the title of this post!

The RBS, OUR bank, was ready to shell out millions of Pounds in bonuses in spite of the fact that they seem not to have been earned and were among the least popular things to have done in recent weeks.

These people took jobs whose aims must have been to build and rebuild the bank: their normal duties. These people took jobs KNOWING that the bank is essentially a public sector bank and public sector people do not normally earn private sector bonuses.

I heard this morning that the contracts of these people are in the public domain but I have to say that I have not looked for them and have not read them. However, I would have liked one or more journalists and/or politicians to have set out the terms in these people's contracts that have triggered the potential for the bonuses that had been announced.

The most important thing for everyone to appreciate is that we need these banks to be planning for LONG TERM stability and prosperity. So if there are bonuses paid in three or four years' time then no one will object I think.

Paying bonuses in shares, however, is a bad idea as share prices rise over time, on average: this means that even if the bankers do a poor job the shares they are awarded will be worth a lot more in a couple of years and they will be paid a bonus far in excess of the merit of their recipients!

More nonsense from the banking world

Duncan Williamson

Managing and Interfering

Nick Edwards has written a very engaging autobiography that I recommend everyone to read. 

Edwards is a doctor in an A&E department at a General Hospital somewhere in the UK. The book discusses two main themes:

medical stories

management and interference stories

I enjoyed the book and reviewed it in full for my own web site: http://www.duncanwil.co.uk/book_reviews/edw.html

There are many business, management and even commercial lessons to learn in this book.

DW

Happy New Year

Dear All,

There aren’t many of you because I don’t post to this blog anywhere near as much as I want to. My resolution this year is to post here at least once a week.

Happy new year to you all anyway.

Duncan

Happy New Year

Dear All,

There aren’t many of you because I don’t post to this blog wnywhere near as much as I want to. My resolution this year is to post here at least once a week.

Happy new year to you all anyway.

Duncan