Consequences of Starting at the End of the Chain

Luca Pacioli (1445–1517) was a Renaissance polymath and a close friend of Leonardo da Vinci and widely regarded as the father of modern accounting.  What might his recordkeeping methods have looked like if Luca Pacioli had access to modern information technologies?

In their article, Pacioli in the Computer Age: Back to the Future of Accounting and Risk, Willi Brammertz and Allan I. Mendelowitz point out the consequences of starting at the end of the chain when you implement accounting processes. While Brammertz and Mendelowitz focus on banks in their article, the same ideas are true for all businesses, large and small.

Current accounting systems tend to focus on generating a balance sheet and an income statement, the debits and the credits.  By starting with the debit/credit problem first, entering financial transactions; when the  IT world computerized accounting they basically started at the "end of the chain" rather than at the beginning of the chain where they really should have started.

To overcome this "starting at the end of the chain" situation, additional systems were added mainly in an ad hoc manner that then used computers to manage the other business activities necessary to actually run a business.

These ad hoc additions, many times using electronic spreadsheets, while supplying essential information to the accounting system, were never designed as part of a cohesive, integrated architecture. Instead, their ad hoc evolution has left the accounting information systems of many, most really, enterprises with fragmented and chaotic IT infrastructures and what amounts to expensive and error prone information "bucket brigades" to get work done.

Today, people see this as normal.  It is not normal.

In fact, this starting at the "end of the chain" causes a lot of problems.  The biggest problem is that here we are in the age of artificial intelligence which offers very significant and compelling possibilities and the information systems which provide the data to drive that artificial intelligences is not ready.

But what if Pacioli were alive today?  He would very likely start at the beginning of the chain rather than at the end of the chain like the IT technologists of the 1950s and 1960s.  He might very likely include future oriented information in his computerized system similar to what he referred to as his Recordance.

What if accounting systems started at the beginning of the chain, with the business events or even earlier with the situations which spawned a business event.

(Another longer version of the article in PDF format can be found here; Pacioli in the Computer Age)

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