Loss - Defined

Loss is the uncontrolled or unmanaged component of business costs that is often hidden from view and most always grossly underestimated.  It is a key component of the profit equation; representing one of the two negative elements along with expense.  Loss is often found represented as:

casualty loss: damage or other loss caused by an accident or act of nature.  The loss may report to the bottom line in the form of the uninsured portion or in collateral damage, increased expense, or business lost due to the damage.

cost of quality: costs associated with the failure to meet minimum quality standards for goods or services internal to the company or at the customer.  Warrantee costs may be included in the cost of quality.

safety loss: increased costs due to unsafe conditions and/or actions resulting in injury to persons.  The cost come in the form of out-of-pocket expenses to mediate the loss, increased insurance costs and the human cost of suffering.

waste: the failure to husband the seven vital resources of time, energy, people, knowledge, time, money and space.

theft: theft cost us billions of dollars per year and is a major issue for organizations of all sizes.  Even churches and non-profit organizations suffer from theft.

sloth:  The insidious "water cooler" behavior that all too many employees will indulge in if given the chance.  How much of your Internet band width is being used for personal purposes?

greed: Sure many big company CEO's and executives are being overcompensated but if you look closely you will find the blue-collar staff and every level in between rife with greedy people who will stop at nothing to take advantage of others for their own selfish benefit.

Profit equation:  The profit equation principle is that profit is a function of revenue, expense and loss.  Simplistically we would say to subtract your expenses and losses from revenues.  In reality, the interaction is complex and lies at the very heart of business success.  more

Revenue: the income stream from sales, licensing, leasing, investing, etc.
Expense: the cost of doing business - usually managed by line item
Loss: uncontrolled or unmanaged costs such as casualty loss, quality or safety loss, warrantee costs, waste, theft, sloth, greed - often hidden from view and grossly underestimated