Better Roughly Right Than Precisely Wrong:

  • Easily overcome your 3 fears about understanding financial information -they are not real!
  • Learn why to an accountant, priceless and worthless are the same thing.
  • Recognize the 3 types of financial literacy and why you don’t have to be good at all of them.
  • Identify the strengths and weaknesses of accounting systems you use and financial information you deal with on a day-by-day basis.
  • Know what the profit line is telling you – and what it’s not.
  • Get to know the concept of the triple bottom line and why it’s important
  • Get a clear outline of the basics of accounting processes and reports written in plain language that you can understand.
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Book Features

What you will learn from this provocative critique of finance and accounting

Fears and worries

We don’t teach people financial literacy and then wonder why theyaren’t good at managing money. I first eliminate the common phobias about money and show how anyone can understand financial concepts and interpret financial reports.

Strengths and weaknesses

Did you know the biggest strength of accounting is also its biggest weakness? Every accounting entry is backed up with pieces of paper, and so there is always evidence as to where the numbers came from. But the downside is that if you can’t measure something exactly (such as reputation, community involvement or clean water) then accountants don’t include it in their figures because they don’t have that piece of paper.

Measuring systems

Human beings love measuring stuff. It can tell us where we are and where we were and so tell us how much progress we have made. But what happens when we are dealing with things that can’t be easily measured. Is ‘objective’ measurement any more meaningful than ‘subjective’ measurements? Better Roughly Right Than Precisely Wrong!

Triple Bottom line

The Triple Bottom Line is the concept that any project or organization should be evaluated on three bases: Profit, People and Planet. Financial numbers are part of it, but we also have to understand the impacts on the social elements of our community as well as the effects on the environment all around us.

Corporations

Most medium and large businesses operate as corporations. But did you know that the legal structure of corporations is now explicitly designed to demand that they take actions that work against our society and environment. Learn how the concept of a corporation has changed over the last 150 years and how lawyers have hijacked and eliminated all of the original controls that could work on behalf of all of us.

Why audits need to be changed

Audited financial statements are the gold standard of judging whether the picture they paint of the financial situation of any organization is accurate. In the past they have been used as the ultimate yardstick of how an enterprise is doing. But they ignore the items that the accounting system can’t handle, and there is no mention of what they disregard. That has to change so that the limitations of relying strictly on numbers are better understood.

Video Reviews

Interview with book author

Mike Fletcher tells you why he felt compelled to write Better Roughly Right Than Precisely Wrong: Why Accounting Is Broken and How To Fix It, and why its message is so relevant for the new economy of the 21st century.

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Everyone uses numbers

Whether you like it or not, our society runs on numbers. No matter what kind of job you have, it is almost impossible to avoid an involvement with figures of some kind. If you work as a warehouse clerk, you’ll be using numbers to track the number of boxes of supplies that you have in your warehouse, to identify shipment information, track spoilage, or fill in reorder forms. As a nurse, you’ll be counting the number of patient visits, using numbers to measure the vital signs of one of your patients, tracking the number of medications and prescriptions that you are writing, and in general using statistics to help you evaluate the overall health of the general population. If you are an architect, you use numbers to calculate space, spatial relationships, weight, weight distribution and other factors for building structures. And of course, if you're a manager of any kind of division or department, you have to deal with financial reports. It is therefore idiotic that as a society we provide such limited practical education on basic financial literacy. In the classes that I teach sometimes no one has had any form of financial education.More than half the population have a (mistaken) belief that they cannot understand what numbers mean or finance in general.

Different types of money skills

Just before we get to the most common phobias people have, one other final comment about “accounting skills” that you think you might have to learn. There are in fact three main groups of accounting functions and they don’t all require the same kinds of skills and knowledge.  Handling and recording money (such jobs as cashiers, bookkeepers, tellers accounts receivable/accounts payable clerks, short-order staff,  Organizing and analyzing the financial information (done by Controllers, Senior Accountants, Accounts Payable supervisors, warehouse managers, many kinds of administrative assistants and support staff)  Managing the big picture (decisions made based on the numbers by CEOs, COOs CFOs, VP Finance and all the other VPs)

Measuring systems

If you have any doubt of how much you are regulated by things around you that you measure, consider the following typical morning. The alarm clock goes off at its pre-set hour, having measured the numbers of hours and minutes that have elapsed since midnight. You do your daily exercises, a carefully measured combination of this number of sit-ups and that number of knee bends. Your breakfast is carefully measured out in front of you, even if the measurements are a cup of coffee, a teaspoon of sugar or a glass of orange juice. The measurement of the day, month and year of the date tells you that this is a weekday and that you have to go to work. You measure the amount of time that you have before your departure if you're going to make it to work on time with the rushhour. As you drive the car, you mentally measure the distance to where your next turnoff is, and meanwhile listen to the local weather forecast with measurements of temperature, wind direction and the amounts of precipitation. If you need gas, you may check the measured price for regular gasoline as advertised by the local garage. As you eat lunch, you measure the amount of calories on the plate as well as the cost of the meal, including tax and tip. You get the point.

The consumer society

The consumer society was an artificial construct created in the 1930s. Society was sold not only a complete bill of goods (pun intended!), but an accompanying philosophy that started us on the path of planetary over-consumption that we are on today. Increasing demand for physical things based on a model of constant growth became a fundamental (and unquestioned) assumption that was built into our government, economic and financial systems Society was transformed in the way it operated and what it considered to be important. It also meant that measuring these quantities of all kinds became critical, so financial systems in general assumed greater importance. As the focus of society switched to quantity (i.e. money) as the best way of measuring what was going on, any system that would help track general or specific quantities more accurately became regarded as increasingly important in being able to measure the "progress" that was being made. The message that more things will make you happier been something that the majority of consumers in the Western world have grown up with. If more things will make you happier, then buying those things cheaper will allow you to spread your money further. That's why chain stores such as Walmart have been so successful. The fact that they're spending vast amounts of oil to bring you junk food made in China, or that the toaster made in Vietnam will only last a quarter of the time than the one built in Canada, is masked with the constant drumbeat about cheap prices that will save you money.

Weaknesses of Accounting

Imagine two companies, both in the same economic sector, tanning leather. Tanning is a process which produces toxic waste as a side element of its manufacturing. Assume that the two enterprises have the same amount of revenues, same number of employees, manufacture the same sorts of products, have the same range of expenses and have the same bottom line. But let's also assume that one of these companies takes all of its waste products and recycles them, while the other takes its waste products and dumps them in the river. From an accounting point of view, the financial statements will report these two companies as being identical. As a professional accountant, I have a really hard time with this analysis. Having used this example in my classes for the last 20 years, I've never had an individual in any of them who believes that the two companies are, in fact, identical. The action that the one organization takes in dumping its waste material in the river has a consequence and a cost. It is not correct that the cost is ignored. It is not correct that the two companies are considered identical and should be treated as the same, whether in terms of profitability or even just being measured (financially) as a good corporate citizen.

Corporations: designed to be bad citizens

It's bad enough that the primary measurement system that we use to evaluate what's going on (Profit)ignores a wide range of factors, as identified in the previous chapter. What's worse however, is that the primary type of business structure that we use to organize our business enterprises is now set up in such a way that in most cases it has now morphed to where its sole aim is to provide profits to the shareholders. As we've seen, the financial measurement systems that we use to calculate those profits only measures part of what its impact is in the wider world. Using a distorted measurement system focused on Profit means that corporations increasingly deliver financial results that ignore their negative social and environmental impacts.

Accounting and economics

Aristotle was one of the first of the world's great philosophers to first think about economics and the mechanics and psychology of using the finite resources available to a society and allocating them to goods and services in the most efficient way. He identified two different sorts of economic activity, distinguishing between the social and natural resources economies (oikonomia), and the money economy (chrematistics). Aristotle was very clear as to the differences between the two. Oikonomia (from which the word “economics” is derived), essentially is concerned with the management of the resources of a household for the benefit of all its members over the long-run. If one extends the concept of an individual household to the planet as a whole, the concept includes stewardship and allocating resources fairly in the long-run for the benefit of all. Chrematistics on the other hand is a branch of political economy primarily related to the manipulation of property and wealth rather than the owning and stewardship of it. Chrematistics relates to the manipulation of money and its equivalents so as to maximize short-term monetary exchange benefits to the individual owner. Aristotle was opposed to this and felt that this activity contributed nothing to society in the short-term or the long-term. When we use the term "economics" today, we make no distinction between these two kinds of activities and we mix them all up together. Nevertheless, I believe that Aristotle's original distinction was quite correct in that Oikonomia adds overall to the wealth of society, whereas Chrematistics is entirely aimed at maximizing individual benefits and is not a productive activity.
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Chapter Overviews

Structure of book

Chapter One

Presuming you are new to the topic, I’ve written the book in a way that I consider a logical flow and following the chapters in the order they are presented will give you the best feel for the overall topic. I tell you about why financial literacy is important to almost everyone in our society. I also provide my credentials for writing about this subject.

Chapter Two

introduces you to everybody's worries and phobias about understanding financial reports. If I can't get rid of or at least reduce your nervousness about numbers, then everything I say about accounting and its results may be clouded by an assumption that "I can't understand this stuff." The second part of this chapter will also tell you about the concept of the Triple Bottom Line, based on having three equally important areas in which we evaluate how an organization, community or government is doing. This section describes the 3 Ps of this philosophy in more detail: Profit, People and Planet. I describe the history of this evaluation process and what it means in terms of trying to change our world view.

Chapter Three

explains where accounting systems came from, the basic elements of two sides to every transaction and the sorts of systems that have tracked our financial records for the last 500 years. But the importance of accounting systems changed radically with the introduction of the consumer society. I'll explain some of the influences that change the economics of our society. Accounting systems, in effect in the right place at the right time, then became all- important in tracking who was winning, who was losing and by how much.

Chapter Four

Fourprovides you with more information about the strengths and weaknesses of accounting. The strengths you are probably aware of and had been told about before, but the number and extent of the weaknesses of accounting may surprise you.

Chapter Five

is about how we love to measure stuff and why we think that’s it’s important. Along with measurement there’s a section on goal-setting, which is closely aligned. I also talk about what is not being measured, as that is often as important, if not more important than what is being measured.I'll discuss some of the specific items that are not being measured and some of the impacts of including the costs if they are more realistically valued.

Chapter Six

talks about corporations and how the way they are defined automatically demands that they operate against the interests of people and planet. I'll describe the growth of their power and influence, and why they're not interested in measuring anything except dollars and cents

Chapter Seven

tells you how profit is often mis-measured and what it leaves out. It describes three practical examples of items where following normal accounting practice means that the “costs” are incorrectly calculated, and shows the sorts of distorted business and economic decisions are made as a result.

Chapter Eight

traces the connections between individual accounting reports and economics. Accounting systems track the individual performances of a variety of organizations. The numbers that come out of those systems, when added together, become used as leading indicators for how society is doing. But government and economic policies are often based on what are in fact incomplete numbers, or the distorted view of the financial measurement system.

Chapter Nine

looks at the nature of work and how accounting treats it as an expense, something to be minimized if profit is to be maximized. This chapter also looks at what we count when it comes to contributed labour, as well as (again), what is not counted from the point of view of the accounting profession.

Chapter Ten

Discusses the changing perspectives of money and the qualities of money that are important and that we need to see reported if we are going to make intelligent choices about our financial decisions as a society.I'll show you a simple adjustment to the present income statement that makes an informational improvement in the financial measurement systems as an example of how useful it would be to add to the information we get from accounting reports.

Chapter Eleven

talks about government accounting. In part of this I take a slightly contrarian view as to areas in which government, with lots of experience in evaluating programs other than by merely financial measurements may have something to teach business about measurement systems. But I also talk about the ways in which government too has financial measurement systems that don’t take into account elements that must be considered outside of the financial bottom line.

Chapter Tweleve

looks at the first of the three ‘Ps’ of the Triple Bottom Line, Profit. It reviews as to how accounting presently reports, what it counts and what it doesn’t. It also describes the ways in which it is failing to produce financial reports that accurately reflect what is going on in all three areas of Profit, People and Planet, as opposed to the distorted picture that occurs when you count Profit alone.

Chapter Thirteen

looks at how we might measure the People aspects of a project or organization. I talk about how People needs to be defined very broadly, and the challenge of trying to measure impacts across a broad spectrum of human resource considerations. It also gives some ideas as to some criteria we might use to judge our success on this front.

Chapter Fourteen

addresses the issues related to Planet measurement, with many similar challenges to those of trying to measure People. A critical consideration is to understand that to an accountant, worthless and priceless are the same thing! Like the previous chapter I describe some ‘subjective’ criteria we can use for this category and then the specific challenges of moving every enterprise to truly sustainable operations for the long-term.

Chapter Fifteen

is specifically addressed to accountants and the accounting profession, asking how the profession can address some of the deficiencies I have identified. It describes how in my opinion every ‘unqualified’ audit opinion is in fact incorrect.

Chapter Sixteen

looks at a variety of specific industries, and what would happen if we evaluated them according to the Triple Bottom Line. Losers include insurance, banking, mining, armaments (!) and monoculture farming. Winners would be teaching, childcare, garbage collection, the arts and stay-at-home spouses

Chapter Seventeen

I've taken the opportunity to try to respond in advance to criticisms I anticipate will come from both from those inside and outside the accounting profession it. I also discuss some of the ways in which alternate measurement systems such as the balanced scorecard are not just another method of achieving the same goals as the Triple Bottom Line.

Chapter Eighteen

provides a summary as well as a variety of resource material and follow-up actions that individuals and committed organizations can make.

 
 
Reader Messages

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About the Author

introducing the amazing author of this ebook

Who is Mike Fletcher CPA, CGA?

My name is Mike Fletcher. I’m a trainer, entrepreneur, maverickaccountant, consultant and a big fan of the Triple Bottom Line. I’m also the CEO of HighSpin Consulting Inc.

Career & Biography

Maverick accountant, trainer, entrepreneur, consultant, and analyst, I’m a CPA/CGA with 35 years of consulting experience in all sorts of organizations, profit/non-profit and both private/public sectors, nationally and internationally. My passion is now financial literacy. I work to make businesses aware of the increased costs and missed opportunities caused by a lack of financial literacy within the business arena. I speak at live events and seminars as well as producing information products delivered over the Internet. I write more fully about all my qualifications and experience in the opening chapter of the book

Personal Motivations & Special Thanks

There are a number of reasons why I felt strongly compelled to write this book and they are intertwined

  • To remove people’s mistaken beliefs that they can’t learn about accounting and finance
  • To introduce readers to the strengths and more importantly the limitations of financial reports and accounting information.
  • To warn everyone of the dangers of leaving financial number calculations up to ‘the experts’.
  • To introduce the concept of the Triple Bottom Line as a broader approach to try and overcome accounting’s limitations
  • To show you where the financial experts are ignoring significant costs, money that you and I will have to fork out ourselves later.
  • To describe this stuff in plain English without falling into technical terms to prove to you that it can be done and that you can learn this stuff.