You don’t find Customer in the P&L or in the Balance Sheet

I don’t publicise the fact that I started out in accountancy and finance – in fact as a Chartered Accountant I am a member of the Institute of Chartered Accountants in England & Wales.

Now I have been wrestling with the a problem: despite all the talk of customers being in the driving seat and the need for companies to be customer focussed and/or customer centred, it is truly hard to find more than a handful of companies that are customer focussed and even less that are customer centred.  Why?

Whilst grappling with this question two thoughts came to me and they are both related to finance.

The first is that I remember a friend from the venture capital community telling me that the way venture capitalists directed/managed the companies they owned could best be described as “management by Excel”.  What he meant was that the VCs determined what price they wanted to sell the business and at what time.  Once they had decided this the plugged some figures into an Excel sheet and that told the senior management (CEO and fellow directors) of the company what revenue and profit figures had to be delivered each year.  The rest – what actions were taken or not taken to make these numbers – was entirely up to the senior management.

The second thought that occurs to me is that in all of my time preparing and analysing the P&L and the Balance Sheet I never came across the term customers.  There is no value given to customer relationship in the P&L or the Balance Sheet.  There is no value associated with customer equity.  There is no value given to being customer-centric.  Customers simply do not exist in the language of finance.  Neither do employees.

I have read that the Eskimos have tens of words for snow because snow – all the different types – really matters to the survival and well-being of Eskimos. In the English language we have only one word for snow as it relatively unimportant.  In the language of finance (P&L, Balance Sheet) there are no words for Customer – that tells you all that you need to know.

The overwhelming majority of companies will continue to focus on making this years numbers by any means.  If one of those means is to be customer focussed then the company will become customer focussed – for that financial year.  If making the numbers means reducing quality of product or quality of service then those means will be used.  What matters is making this years revenue, profit, cashflow and EBITA numbers.

Or to put it differently in the real world of business, customers and employees are simply means to a higher cause: making the financial numbers.  Can this kind of organisation ever be described as being customer centred?  I’ll let you decide.

%d bloggers like this: