Business Intelligence and Summary Accounting - Part 2
Intro: Whether you’re on the go or in the office A2X will save you time and money. You’re selling on an e-commerce platform and you want to do it right. This video is an interview with Conrad Rohleder, founder of Clearinity, a premier integration company.
Conrad Rohleder: When you had brick-and-mortar stores, a customer had to stand in front of you and you had to sell them a product. With e-commerce, you’ve got 10,000 orders a day and you don’t even need to talk to customers on Amazon; it’s huge!
BUSINESS INTELLIGENCE & SUMMARY ACCOUNTING
Karen Brady: In this segment, we’ll take a look at aspects of inventory management for a multi-channel e-commerce business. So, what is business intelligence and how is it crucial in this context?
Conrad Rohleder: Yeah, that’s a good question, and… and really, this is part of what we do all day here. Business intelligence in a way that we define it at Clearintity is really… it’s about what’s happening or right now. Of course you can debate how long is right now, but… but for all intents and purposes, it’s really about orchestrating what’s happening in the moment, right? It’s… it’s about digital and human systems coming together, it’s about how humans are running those systems right this moment, and trying to discover what’s happening now, right?
Part of this goal is defined as we are collecting and analyzing data, that we have this longer goal of being able to predict future behavior, but that we have to recognize that whatever data we’re collecting, whatever analytics were putting together right now are imperfect and we have to plan around that imperfection. And I think that imperfection is what kind of separates accounting from business intelligence, right?
Karen Brady: Right. So… so, the weight of this process is the actual operations, moving product, launching the marketing, ordering and receiving, delivering on sales and on all channels. It’s clear that business intelligence concerns evaluating processes and the results, predictive analysis and planning for contingencies.
Conrad Rohleder: Right, right.
Karen Brady: Building that agility in.
Conrad Rohleder: Yeah. And… and I think from that context, that’s really what kind of tells us that it’s separate from accounting. I mean, accounting is all about what actually happened, right? And it’s done, we can now document and say that’s exactly how it went, here’s how it shook out, right? It… and in that sense, accounting becomes a health check on business intelligence and operations; which is what it should be. But the only way that we do that effectively, especially in e-commerce, is with summary accounting. So, around here, we say summary accounting is good accounting, you know?
Karen Brady: Yeah. And ecommerce inventory is such a core element. What part of the data from (unclear) [02:55]… yes, in e-commerce inventory is such a core element. What part of the data from this business intelligence is recorded to the accounting system and what… what isn’t?
Conrad Rohleder: Right. Well, you know, I think it helps to frame it from the perspective of how is… how is business intelligence not accounting, right? And so for instance, if you use things like KPIs and you know how to put metrics against what you’re doing, KPIs, generally speaking, shouldn’t be based on whatever is happening in the books. Especially things like sales velocity, that’s something you can run a report right this second and get, you don’t need to wait till the end of the month for the books to close, right?
Or other questions of like how does X do against Y? That’s a great example of business intelligence, and this is one of those things that traditionally we would wait for all that data to hit the books to then get those numbers back out and say, oh, that’s how we did, we don’t need to wait like that anymore, you know?
So, again, how does this relate to the accounting system? I mean, inventory and everything around it is really a sort of sub ledger of the larger general ledger of your business, and you should be treating it as such. You know, this includes things like unit costs, cogs, your inventory valuation, these are just some of those things. There are other aspects, but those are the ones that I deal with most often. Even still, by the time we take all of that inventory related information and we want to get it to the books, we should still be doing it in a summarized accounting fashion.
Karen Brady: Mm-hmm, yes. So, this is definitely where summary accounting comes into the picture. Well, it’s really illuminating to see the issues of inventory and accounting from this perspective. Thanks for contributing your clarity and expertise.
Conrad Rohleder: Thank you.
Karen Brady: Summary accounting is recorded after the fact. It really suits the context of massive volume ecommerce, it vastly simplifies and categorizes transaction data, reducing time and effort, no matter the number of sales. Truly granular details such as number of SKUs sold can be stored in other places, apps such as A2X or dedicated inventory apps.
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