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The Problem with Price Tags

5/31/2018

2 Comments

 
Certainty can be comforting. Knowing where your next meal is coming from and where you will lay your head at night allows one to focus on other challenges throughout the day.

But do we similarly crave certainty when it comes to knowing the price of things? Are we better or more poorly served by a Prix Fixe economy?

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A shelf full of peanut butter jars, all marked with the same price tag, may make our purchase decision easier but does it give us the best value? Does it limit the merchant's profit potential?

And has the humble price tag lulled us into a sense of certainty that things have a fixed value?

For most of history people would haggle for everything in the market. Then, in the mid-19th Century in the US, Quakers and others decided that charging different people (whom God saw as equal) different prices was immoral. Hence the fixed-price tag.

At first people were suspicious of the tags. But they got used to the idea and, over time, empires like Macy’s were born on the back of them. 

Now they might be on their way out again. Variable pricing is creeping back into our lives in some unexpected places. From Uber surge pricing to airlines that look at all sorts of factors to quote you a ticket price, including apparently whether you are browsing with a Mac or a Windows PC.

Variable pricing means you need to pay more attention. That's my advice, for what it's worth. 

Peter

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2 Comments

Is Accounting Precise?

5/24/2018

1 Comment

 
When you say “accounting," many people immediately think “precision."

After all, famously, if you have $101.11 on one side of the balance sheet, you’ll have $101.11 on the other. That is an absolute truth. This 100% exact mirroring sets the tone.

But is accounting really precise?

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In another respect, accounting isn't precise at all. At least not in the sense of being "certain" or "absolute."

On the way to coming up with the symmetrical numbers of the balance sheet, there's a whole lot of estimation and subjectivity.

For example, to decide what an asset is worth, should we refer to what we paid for it, what we could sell it for, what two reasonable people think it’s worth, what the market thinks it’s worth, or perhaps the cash that will flow from it? Some might arrive at larger numbers, others smaller.

There's no single truth and you might say it's an informed guessing game.

Like asking how long is a piece of string, the closest you'll come to a truly precise answer is: "Twice as long as half its length."

Peter

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1 Comment

Five Reasons People Don't "Get" Accounting

5/17/2018

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Accounting suffers a "can’t see the forest for the trees" problem. 

We accountants are so immersed in the language and practices of accounting, which have evolved over hundreds of years, that we’ve lost sight of our bad habits.  

Here are five of them.

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Photo by Toa Heftiba on Unsplash

1. We Use Different Words for the Same Thing
For example, earnings, profit, net profit, income, and net income are all used to mean the same thing. 

2.  We Use the Same Word for Different Things
In the UK “Income” means revenue, the top line. In the US “Income” usually means profit, the bottom line. But not when you’re talking about Rental Income, or Interest Income.

3.  We Use Weird Words
Like debit and credit - which have less meaning than people believe. (That’s why Color Accounting uses color instead.)

4.  We Use Paradoxical Words
Prepaid Expenses aren’t expenses, they’re assets.
Deposits (such as those received by Tesla for future Model 3 deliveries) aren't revenue. They are liabilities.

5. We Collapse the Duality
There’s an inherent duality in accounting. The duality captures on the one hand what we do with our resources, and on the other where those resources come from. For example, we put cash in our bank account, which came from our work revenue. The bad habit is describing the revenue as the cash. 

To boost the confidence of our students to engage powerfully in financial conversations at work, we show them that “The confusion isn’t your fault, it’s ours. So ask away.”

We accountants have a lot to account for. 

Peter

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Learning To Read The Fine Print

5/10/2018

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The Fine Print? You probably think I’m talking about how to interpret legalese. Like the contracts that none of us read (but say we have) when we download apps.  

But I’m not. I’m talking about how to read any text that’s printed in a very small font. There’s a story here.

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I was leading a seminar for bankruptcy attorneys in Southern California last week. It was over dinner. It was fun. It was collegial. It was great learning.  

But when I handed out the case study, one of the participants exclaimed “How can I see that total? It’s tiny!”

To which I replied, “Use the magnifying glass on your phone. If you press the button on your iPhone three times it brings up a magnifying glass.”

And - as they say in the classics - the room went wild. I lost them for at least five minutes as chattering people excitedly turned on this Accessibility function of their phones and prodded their neighbors devices.  

I just stood at the front and laughed out loud. Middle aged eyes like mine had hijacked the room. 

Everybody went home thrilled at what they’d learned. Which, they reassured me, wasn’t just how to read dimly lit restaurant menus.

Peter

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Will We See You In San Diego?

5/3/2018

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No place in the world is quite like Southern California. Dry climate, miles of beaches and multi-cultural adventures around every corner.

Next week San Diego will be featuring another attraction: the 2018 ATD International Conference and Exhibition, being held Sunday through Wednesday at the convention center.

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Photo by Cheyenne Knowles on Unsplash

This weekend over 10,000 attendees and exhibitors will begin descending upon this seaside city to learn from more than 400 experts at over 300 sessions.

Keynote speakers include former U.S. president Barack Obama, British author and business consultant Marcus Buckingham, and leadership guru Ken Blanchard. 

The Color Accounting team never misses the annual Association for Talent Development confab, no matter where it is held.

We have found it to be the single best place to connect with our partners, peers and clients, whilst staying on top of the latest learning techniques and technologies.

Will you be at ATD in San Diego as well?

You can find us at Booth #2220. Please pop by and say g'day!

Peter

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