Definitions for TrueValueMetrics
Balance sheet. The balance sheet is one of the most powerful analysis tools in accountancy ... critical in corporate financial analysis ... and central to the design of the TVM system. A balance sheet is accountancy shorthand that describes the financial conditions of an organizational entity and is fully applicable to a community as the reporting entity. A balance sheet shows assets and liabilities. A balance sheet is an efficient way of showing with very few numbers the impact of thousands or millions of individual financial or economic transactions. Comparing the balance sheet from different dates makes it possible to measure progress very tangibly and very easily.
Activity Statement ... An activity statement of a community in the TVM system is similar to the operating statement or profit and loss account, or income and expenditure account of a business entity. An activity statement serves to explain the use of resources and what was received in return. While the balance sheet is useful in describing how much change has happened ... the activity statement serves to explain how the change happened. The activity statement can be in summary ... or in great detail depending on the need for analysis.
A TVM activity statement has two sections:
In some cases money costs and value consumption are the same, but not always. In some cases money revenues and prices are the same as value creation, but not always.
- the flows associated with money costs and the money revenues; and,
- the flows associated with value consumption and value creation.
Value chain analysis. Value chain analysis is a technique that relates cost, price and and profit ... and value consumption and value creation in a complete transaction matrix. The value chain analysis explains the aggregate of value consumption or destruction and the aggregate of value creation and value adding and reconciles the aggregate with the winners and losers at different stages of the value chain. The value chain analysis may be applied either over time, over geographic space, or between organizational entities. Value chain analysis shows how critical local community based economic activities are to the community and how damaging many profitable global value chains are to society.
Analysis and reporting. The process of collecting, organizing and storing data has a cost, and not much value. But analysis and reporting makes these data valuable and powerful. Analysis may merely confirm that what was expected has happened ... or it may help to deepen understanding and facilitate new and better ways of creating value.
But nothing will happen unless there are reports. Reports should be part of a system and report nothing as reliably as they report something of significance ... in other words accountancy has reports that are not a subset of journalism but are an independent system in their own right.
There are many reasons for reporting. Among these the following are the most important: (1) to facilitate change or improvement; and (2) to hold people accountable.
The key characteristics of TVM reporting are as follows:
A report should be “a click away” ... web accessible ... mobile accessible
Less is more
The core reporting entity is the community
Data sources are confidential ... but the report has high reliability
There is clarity ... even in complexity
Reporting of cost routinely includes value consumption
Value adding more equal of more weight ... or emphasis ... than profit.
Quantifying value is important ... but even without quantifying value should be identified.
Value is the key metric ... even though there may be multiple views of how important any specific value has.
TVM reporting highlights surplus production
TVM reporting highlights productivity
Reporting ... Facilitating Change Feedback