Crunching the Numbers

“Anyone who isn’t confused really doesn’t understand the situation.” – Edward R. Murrow

We were reviewing our mid-year financials, running through the Profit & Loss statement, capital investments, cash flows and so on. This is, for General Ledger – our CFO with the deep-dish ears, fearless leader of the White Shirt Brigade, and resident curmudgeon – the Sermon on the Mount. It is, for me, an interminable drag.

Not that I am disinterested in the numbers but, if it’s true the devil is in the details, this place is most certainly Hell. For a full morning, we pored over the numbers, line by excruciating line. GL’s voice was an incessant drone that has approximately the kind of neurocognitive effects that you would get from transcranial direct current stimulation over the dorsolateral prefrontal cortex. Except, instead of stimulating the brain, it dulls it to oblivion.

One of those lines, I admit, did pique my interest. In looking at our operating profit, we went into the details of our SG&A (sales, general, admin) and distribution expenses. Spending here was up year-over-year and explanation was required. Apparently revenues had increased thanks to a very buoyant market and several very successful product launches. By extension, however, shipping costs also increased, as did sales commissions. For some, it seems, this is a problem, the issue being that cost budgets were broken.

Meeting budget is serious business in the Small Office… as it should be. But the end result is that the better our top line is, the more it seems we have to defend it. Like the song says: good is the new bad. Of course, I do get the point, but the attitude gives me pause.

It is simply not important how many angels can dance on the head of a pin.

To be fair, there are other accounting constructs that I do not get either. I could never really understand why accounts payable are credits and accounts receivable are debits. If we owe money, apparently, that’s good; if we are owed, that’s bad. Tell that to your spouse.

I believe all this confusion is due to the invention of double entry bookkeeping which eventually begat the balance sheet and likely the inevitable illicit practice of keeping a second set of books.

Balancing is a good thing. Minutiae, trifles, niceties, and all the tiny particulars of life that require sincere answers to stupid questions… less so. It is simply not important how many angels can dance on the head of a pin. It is important only that they can.

All of this whining is, no doubt, an unintended result of all that transcranial stimulation that deep-dish accounting has on me and I apologize for it.

(As an aside to the engaged reader, accountants furiously debate whether double entry bookkeeping was invented by Luca Pacioli, a Franciscan monk who, back in 1494 in Renaissance Milan, while instructing Leonardo da Vinci on the finer points of mathematics, wrote the Summa de Arithmetica, Geometria, Proportioni et Proportionalita, or by Benedikt Kotrulejevic (more familiarly Benedetto Cotrugli) who, in 1458 in the bustling Croatian burb of Ragusa, wrote the breezy and beguiling Della mercatura et del mercante perfetto. I believe it is a product of Twilight Sparkle, she of the Ministry of Arcane Sciences. You decide.)

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