The Code that Sets Your Numbers Free

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Focus AccountingDoes the term ?Extensible Markup Language? (XML) mean anything to you? It is a widely used standard for defining data placed on Web pages and exchanged among businesses via the Internet. Early versions of the World Wide Web made it easy to distribute readable text; XML does the same for data, allowing businesses to easily build Web pages with the power of expensive databases.
And Robert Meldahl wants to teach you a thing or two about it. His book, ?Banking the Past, Extending Accounting in the Information Age,? is not an easy read, but it offers a thorough grounding in the benefits of XML.
Until now, most accounting reports were set up to describe fiscal results for fixed periods and to satisfy a particular user, such as an accounts payable manager looking at outstanding bills; the information could only be accessed through an office computer or a paper printout. XML sets a company?s data as free as all the other information whizzing about the Internet.
Meldahl says an XML-based report can be easily generated based on the user?s needs, then automatically formatted to fit a Web page, a handheld computer like a Blackberry or any other device that can talk to the Internet. It frees the company to make choices about data collection and create new types of reports as needs change.
?This new model of accounting can [also] provide vast amounts of additional information, can be adapted to any business in any industry and can provide financial analysis on a real-time basis,? Meldahl says.
Meldahl is a former attorney, and his résumé includes stints as a computer scientist at the old Bell Labs and as an information technology consultant. He was also a vice president at Bear Stearns, responsible for IT projects. Meldahl, who has things on his mind beyond accounting, also wrote ?Being and the End of History,? a book exploring Western and Eastern philosophy.
That carries over to this book, which provides a philosophical underpinning to XML and is, Meldahl says, intended for ?accounting professors and other accountants that have research interests.?
This means the reader may find out more than he or she wants to know about the history of accounting and why, in Meldahl?s opinion, it needs to evolve to an XML format. This is an issue that has been gaining momentum, particularly since the September 2004 Securities and Exchange Commission announcement that public companies will be given the option of filing reports in the related XBRL format. In fact, more than 250 companies, including Morgan Stanley and Microsoft, are using XBRL, according to the February 2005 issue of the Journal of Accountancy, which is published by the American Institute of Certified Public Accountants.
As Meldahl notes, a traditional accounting system captures and presents the bare bones of such transactions as the sale of a product. In this case, sales revenue is recorded and either cash or accounts receivable is increased, depending on the method of payment.
But a lot of valuable data is being thrown away. ?At the time that a business transaction occurs, the computer?or electronic cash register, bar-code reader or human clerk?is able to capture a tremendous amount of information,? writes Meldahl. ?The identity of the customer, the time of day of the transaction, the salesperson making the sale, the method of payment and other information can be generated at the actual point of service.?
With this data, he says, ?new relationships, such as those that reflect customer behavior or product costing? can be captured, tracked and easily displayed using an XML-based accounting system.
Large companies like Wal-Mart already use a variety of data-mining tools?including XML?to unearth these and other relationships. But Meldahl, who is developing an XML-based accounting system that will be marketed to commercial users, says the cost of Wal-Mart-sized systems can be out of reach for most small or medium-sized businesses. He estimates that the cost of an appropriate XML package, which could be maintained by the provider and accessed over the Internet, could be as low as $600 a month.
Some companies in New Jersey, like A&E Financial Services in Howell, charge a similar amount to support such traditional business applications as QuickBooks, which offers payroll, inventory, general accounting and other tracking and report services.
Meldahl appears to have done a lot of research and offers extensive footnote documentation to back up his points. He also does a very good job of walking a reader through the accounting process and clearly demonstrates?without being too technical?how XML fills in the knowledge gaps missed by traditional reporting systems.
But his desire to offer detail colors his writing style and at times Meldahl simply presents too much information. For example, although XML is the heart of his story, it?s not even mentioned until some 20 pages into the book. Before reaching that point he delves into the nature of commerce and the background of basic accounting. And in the span of 12 pages, he repeatedly asserts such obvious points as ?the computer?is a powerful tool.?
This doesn?t detract from the book?s value, however. As Bob Dylan pointed out, ?The times they are a-changin?,? and business owners need to change with them.
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