Used for over 500 years, no other innovation has been so enduring as double entry bookkeeping. Why is it so successful? It allows the accurate measurement of profits enabling the better management of businesses.
The key to progress in any field of human activity, measurement is the start of an almost magical process. Systematic measurement and management will enable anyone to achieve major improvements to health, wealth and career.
Now digital bookkeeping combines the power of the Internet with the double entry system. Two of the most powerful innovations ever devised are fusing with explosive results. The double entry system has generated vast wealth for individuals and countries. We can now engineer this success anywhere.
Josiah Wedgwood's cost measurements laid the foundation of today's consumer society. Measurement has the power to transform societies. We can lie down as globalisation crushes us, or we can build a new model globalisation fostering prosperity and social cohesion.
From the day we are born, measurement shapes our world. Examination results, clocks, credit scores - the list is endless. It is time we controlled the process.
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If businesses are investing time and money setting up a new accounting system it is better to reap the maximum return for this effort. If everyone changes their focus to financial management, these returns could be extraordinary.
My concerns are twofold. Firstly, that HMRC has totally underestimated the effect the new regulations will have on taxpayers.
My second concern is that businesses and their advisers will underestimate the benefits to be obtained from keeping records up to date, including improving both financial control and interaction with customers.
I would guess that tax inspectors checking records to uncover VAT and tax evasion will be more productive, perhaps by a factor of 10. A VAT inspector, previously, might have to spend several hours travelling to inspect physical records at the customer's premises, and then spend several hours comparing these with the printout of VAT returns submitted. Now, the same inspector will be backed by powerful analytical tools which will probably be able to automatically indicate any concerns about the VAT records. This highlights the importance of running a tight ship.
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