MACPA Sample Accounting Reports

(The Top Line and 2 Bottom Lines) + Prime Key Driver

The Dollar Trend graph on the left shows the story of Revenues, Profit and Operating Cash Flow from 1998 to 2011 in thousands. The beauty of this view that Chuck Kremer came up with in the Financial Scoreboard is that it allows visual comparison of the patterns of Total Revenues/Sales with both Net Profit and Operating Cash Flow (OCF) trends. He did this by using the right hand register for the Sales and the left hand side for the OCF and Profit.

As you can see in the first four years shown, the team was successfully building Revenues from around $3mm a year to over $4mm, but at the same time losses went from almost $200k to almost $400k. In June of 2001, the CEO used the Financial Scoreboard and Three Bottom Lines training that Jahn had developed with Chuck Kremer to teach the entire staff how the business model was working, and how it was not working, thereby engaging the entire staff in a mindset of fully informed fiscal prudence.

As you can also see at another glance, that mindset got everyone very clear how to first get to break, even and then make sure that profits tracked up with Revenues, not down. On the right when you look at the fuel gauge, you can see the dramatic transformation from paying for every dollar of revenues with operating cash out of the bank account, to building cash in the bank to perform on loan obligations from the turnaround, and begin steadily building cash reserves back up.

Dollar Trend: Business 'Tachometer': - Sales is keyed to the right-hand side, at approximately a 10 to 1 scale

Net Profit or LOSS: - The amount of value added or lost in a business during a specific operating period of time. It shows non-cash values, and so must be considered along with cash when measuring the performance of a business.

Operating Cash Flow (OCF): Cash flow from operating activities. Reflects inflows and outflows of cash related tooperating the enterprise. A measurement of the internal generation of cash. If consistently larger than profit, consistently builds cash reserves or internal investment capacity.

Sales: Also called Revenue. A measurement of all billings for a time period, for value of products or services provided to customers. Can be expected to result in collections of cash as defined in the sale agreement.

OCF/Sales: Business 'Fuel Gauge' - Shows the overall pattern of whether a company is building or depleting its cash reserves.

MACPA’s Performance Measures benchmarking from 2005 shows the status of both the overall financial measures, and the emerging behavioral indicators being used to connect what people do to driving ever-improving operational and financial performance.
You can see on the right that while they are actively tracking all three bottom lines, the engagement with projecting future OCF and Return on Asset’s Stewardship is not in place.

After several years of solid Revenue growth and growing profit, MACPA is also focusing attention on building meaningful key performance indicators that can begin to link non-financial data directly with Cash Flow, Profit and Return results.

By early 2011, we realized that the environment was getting more complex and we needed to evolve our business model once again. We began the process by having our CFO, Skip Falatco, do a thorough self-auditing process on his own behavioral and financial knowledge of MACPA with Performance Management Institute (PMI). With support from PMI, our COO, and me, Skip developed a draft accounts list PMI calls our Chart of Behaviors, which showed the complete sequence of value-creating activities we follow to serve our members. The beauty of that approach is that it also shows the activities that generate all our financial results.”     Tom Hood, CEO, MACPA

Once a Chart of Behaviors is fully validated by all the stakeholders selected by the senior leadership, then it can be visualized as a Value Cycle that shows everyone the continuing loop of value creation that generates all the customer outcomes; and all the financial results. In the case of the MACPA, this rock-solid foundation of unanimous agreement about ‘what we do here’ was co- created by the entire staff. There is a poster of it on the wall outside the CFO’s office, and every staff member has a laminated copy for their personal reference any time they need to make a connection between their insights and the matter(s) at hand.

Having this unanimously affirmed visual reference point brings fantastic clarity and focus to every conversation because everyone at all levels can see how their areas connect with all the others. They also have great clarity on both the hand-offs they receive, and the ones they make, so the value throughput to our members is as focused, smooth and full of impact as we can make it.

Once we had the KPI Impact Teams aligned and getting up to speed, we asked Jahn to come back in to do a Management Scoreboard Kaizen on our organizational measurement system. We wanted to get our entire staff to understand the financial side as well. Now that the staff was under way with understanding and driving the behavioral side, it was time to connect that to economic results.” Tom Hood

The first step in a 3 Bottom Line analysis is to map the accounts on the Balance Sheet and the Income Statement to the universal format developed by Chuck Kremer into the Financial Scoreboard (FSB) from Lou Mobley’s original discoveries. This is the beginning of doing a reality check to begin thinking through whether the current way your financial statements, and especially your Balance Sheet, make the most sense given actual operating reality and future mandates.

Once you have done the mapping, then it is more straightforward to enter all the data from every account directly into the Financial Scoreboard.

If you want to run your own numbers on the free four period FSB, you can download it and the worksheet above from Once you have done the mapping, simply replace the SOHO case numbers with yours.

If you do not have the ebook or kindle version showing the color-coding, you can see it when you download the free demos above.

On the top half of this screen is the Mobley Matrix shown as a Financial Scoreboard (R). These are the actuals for MACPA in 2011. The FSB automatically calculates the 4th column as a Direct Format Cash Statement organized by the accounts on the Balance Sheet, just as Lou Mobley discovered in 1959.

If there is anything missing from any account, the zero you see below the ending Balance Sheet for 2011 will shown the total missing amount. The matrix is only ‘a working magic square’ if all the accounts zero all the way around. In accounting terms this means this format could be called either ‘self-reconciling’, or an ‘automatic trial balance’.

These summaries of the transactions related to property, contract and cash turn out to have 6 different distinct types of number data, which fit together perfectly to form an exquisite whole. They do not however, in and of themselves contain much, if any meaning.

The bottom half of the screen above shows Lou’s 2nd breakthrough, garnered from years of building IBM. He found that there are three bottom lines, not one, needed if you want to manage every account on every statement. He also found that there are only 12 sets of numbers that mathematically create those Three Bottom Lines, which Chuck Kremer calls the 12 key drivers (see the glossary at for the key driver definitions).

Last, but not least, are the two Cash Statement formats. The Indirect Format on the right is the only one well over 90% of businesses ever see, unfortunately without even a single account showing actual cash flow from operating activities. In the center, on the left hand is the Direct Format, which is the only place you can find the actual operating cash accounts. If you are a user of QuikBooks ®, as one example, you do not have this format available.

Once you have done an analysis of actuals history, it is then a very straightforward process to input budget data for the next period(s) as MACPA did above for 2012. Going into the 2nd huddle, given the actual history through the year so far, the original small Revenue growth and small profit scenario was no longer going to hold - unless something changed.

By having the Trending for all Three Bottom Lines and all 12 drivers visually obvious, there is highly practical transparency of both the results and the key financial drives that are generating them.

If there is a comprehensive Behavioral Accounting model which includes a validated set of system-level key performance indicators that are tied directly to one or more drivers, then each team can have line-of-sight from what they are doing to the financial results impacts they are focused on creating.

After we oriented the whole team to 3 Bottom Line performance and showed them how to project results in the future, we looked at the story of our last 13 years since 1999, so everyone could see how our history is reflected in our total revenue, profit and operating cash flow record. We then showed them the loss scenario that was likely to happen if we did not change that outcome together. We developed a report that showed financial details that were relevant to key functions each person and team performs, and then we had them sort into work teams to explore the data and look creatively at how to really pop their results for the next 4 months. We called it our ‘Hit the Gas’ huddle.” Tom Hood

The Financial Dashboard (FDB) above shows visually the 3 Bottom Lines and 3 Key Drivers for MACAP from 2005 to 2011.

This FDB shows what 2012 looks like when added. Note the steep decline in margins as shown by Return on Sales, going straight down on the right. To run a four periods free demo with your #’s, go to, & click on the Enron FDB.

By the 2nd Kaizen we had focused down to 3 system KPI candidates from the original 5 the staff had invented, with which they begin their monthly process of data gathering, and working to demonstrate the validity of their assumptions. Two of them were new since the KPI Kaizen, and the other one had stuck as developed by the staff.” Tom Hood

The staff submitted over 70 disconnects that they saw were significant constraints on value creation, member service excellence and financial performance. Those were analyzed down to over 30 distinct insights on harmful patterns reflected in the total data. During the KPI Kaizen in September of 2011, the entire team was able to connect over 20 of those patterns to one or more value-creating activities. From that base of linked disconnects, over 15 potential whole system-level Key Performance Indicators were defined. By the end of the Kaizen they had focused down to 5, and self-selected into teams around each KPI.

By the Management Scoreboard Kaizen, the Decision Team made up of the CEO, CFO and COO had worked with all the learning going on in the Impact Teams and the Monthly Huddle, to refine the base line focus going forward. Each KPI loop shows the disconnect linked to both the value-creating activity, and the KPI that they hypothesize will show whether improvement activities are actually working as intended. Each KPI is linked to the key driver it affects most directly, which is then linked to the bottom line it drives.

With this picture being further validated and refined as needed each month, a continuously more relevant and rigorous model of the objective functioning of the whole system is evolving, with complete transparency to all participating stakeholders.

Each person has complete freedom to both contribute, and feel the satisfaction that genuine co-creation brings. This spreadsheet above provides a glimpse into the some of the work within the entire group’s discovery process. They all participated in figuring out together how what they were doing, and what wasn’t working well, could actually be defined meaningfully. By using the self- auditing discipline of thinking through what kinds measurement could they do that would provide meaningful and timely feedback on whether the results they were getting was actually what they were intending, every iteration of the learning brings greater clarity and impact leverage.

“In our ‘Hit the Gas’ Huddle after the 2nd Kaizen, everyone really went right into the nitty gritty details, and many great insights emerged that together could well put us over the top for the year.” Tom Hood

The key activity that allows the Integral Operations Finance practices to function as a continuous improvement learning loop is a monthly 76-90 minute KPI Huddle, of which an example is shown on the following page as the final exhibit. Each impact team reports their KPI Statement data, or plan to develop the data if they don’t yet have it, the assumptions that they have validated to support the data, and the assumptions they are modifying or discarding because testing has shown inconsistencies. Both the data and assumptions are focused on the challenge(s) of driving improvement in the key disconnect they have prioritized, and achieving the financial results specified.

KPI Huddle Agenda

This is a map of the 12-18 month process that MACPA is following as illustrated in all the previous exhibits.

The Management Scoreboard Kaizen, shown in the lower right, was held in early March, 2012

© JW Ballard and Performance Management Institute, 2012, subject to review and approval of the Senior System Steward of this Case. 

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