CFO Folklore: Joke of the Day


From an actual email exchange:

CEO:    "I wonder when my crack accounting team planned to tell me about this previously unknown accrual!"

CFO:     "First of all, it's not crack, it's dope!  Secondly, the accrual is only 5 minutes old and you are already informed.  We are not in an AT&T commercial, you know."

 


 

CNN Breaking News: President Obama Is Elevating SBA to a Cabinet-Level Agency


Get-attachmentIn my book "CFO Techniques" I praised the U.S. Small Business Administration agency (SBA) for its role in supporting small businesses, particularly with their loan-backing program, and the amazing informational gold mine that is SBA.gov site – literally, the best resource out there. It's no surprise that when CNN's news flash quoted in the title of this post has arrived into my mailbox last week, it immediately caught my eye.

You've got to admire the skills of the public relation specialists in Washington (I wish my publisher's PR department was as masterful, or at least as industrious)! Look at the words selection: "elevate to a cabinet-level." Wow! Sounds like the president is going to take the "lowly peasant" (never mind facilitation of over $30 billion in loans per year and $570-million budget) and magically transport it to Mount Olympus to reside there with gods. And how democratic! The whole agency is being "elevated," as if all of its 2000 employees can be members of the cabinet. Some people may even think that this will empower the small businesses and their interests will become "special" – just like the ones of pharmaceutical giants, auto manufacturers, big oil, and mining conglomerates.

In reality, the only person who immediately benefits from this move is the SBA's Administrator, Karen Mills. She has become a member (already listed on www.whitehouse.gov/administration/) of Obama's cabinet and now will rub shoulders with the likes of Hillary Clinton and Janet Napolitano.

Whether Ms. Mills' accomplishments at SBA (or credits she takes for her subordinates' accomplishments) justify her new status could be a subject of an investigative journalism exercise. If it's White House's conclusion that she is the best candidate for providing the President with the advice on the only opportunity to save this country's economy, i.e. cultivation and support of the small-business environment, then be it.

I am more interested in the actions that will follow this first step in what being hailed as a program for raising "international competitiveness of American companies." You see, SBA is not meant to remain a cabinet-level agency for too long. In fact, it's not meant to stay a government agency at all. The intention is to "merge" SBA, along with the Export-Import Bank (ExIm), the Overseas Private Investment Corporation, the Trade and Development Agency, the Office of the Trade Representative, into the Department of Commerce (already a member of the Cabinet).

Whether they will continue calling this newly formed government Chimera the Department of Commerce or find it a new name (the way it happened with the Homeland Security), it is obvious that the already existing ministry will absorb all those other entities and, as it always happens, with the loss of independence, their functionality will be stunted.

Look, what happened when HMOs started swallowing far more flexible smaller health insurance providers and formed such giants as Aetna, CIGNA, Health Net, and United Health? Did it make anything better for members? Of course not, we all know this: the premiums went up and the coverage got worse.

Do consumers and businesses benefit from the crazy wave of bank mergers we have experienced in the past 25 years? Again, no. The services get worse and the fees get higher (plus, the process contributes to unemployment).

Any type of consolidation cannot be considered an improvement. It's done for a show – to demonstrated that something cardinal is done. The results? Who cares?

In case of SBA, this is really a shame, because they have made already and could've continued making a significant positive impact on the struggling entrepreneurial business sector. Now, their good initiatives will be drowned in public policies, fiscal regulations, national directives, and all that other country-wide crap. Their micro-level approach will be gone forever.

I find it incredibly ironic that the entity dedicated to help small businesses will be remodeled as a part of a large-scale program.

Unimaginable Abyss of Accounting Ignorance


We constantly read and hear about American students' low level of academic performance. They rank 23rd out of 57 nations participating in international testing. Researchers and public-policy makers have been trying to figure out the reasons for this abysmal show of intellectual power. The "education system" is usually blamed: different teaching methodologies, testing devices, and so on, and so forth.

In my opinion the problem has nothing to do with educational technicalities. It's has to do with obvious gradual degeneration of general public's intellectual abilities (blame it on the mobile devices' radiation, if you have to). Whatever the reason, fact remains: high-schoolers are doing worse and worse in all subjects.

The common sense should lead a logical person to a conclusion that the declining academic achievements translate into a reduction in college enrollments. If one cannot keep up in a secondary school, how can that person attempt to receive a quality post-secondary education, right? Wrong! Between 1989 and 1999 college enrollments increased only by 9%, but in the 10 years after that – by 38% (!!!), from 14.8 million to 20.4 million.

And, of course, it's not easy to get into Ivy League schools, which accept 10-20% of the applicants (well, my readers know my opinion about the quality of education there). Yet, more than 80% of colleges in this country accept every other applicant, and there are some with 100% acceptance rate. I mean, the colleges want money and they will lower their requirements to whatever levels in order to fill the seats in the lecture halls.

So, every year millions of young people who were not succeeding at the high school level enter post-secondary education system. Why do they do that instead of trying to start their own businesses, attempt creative pursuits, or go into honorable and well-paid blue collar trades, I have no clue, but it is what it is.

Now, those kids who had comparatively better grades, some artistic inclinations, and/or expect to utilize their parents connections in the future take pre-med, pre-law, finance, marketing, various arts and designs . Those who don't think, or don't need to think, about their survival head for liberal arts. So, who ends up taking accounting majors? Everyone else as long as they can count without using their fingers.

But accounting and taxation are not easy. To fully understand it one should possess propensity for conceptual thinking, analytical mind, ability to absorb high volumes of regulations, standards, codes. And I am just talking about basics. 30-35 years ago up to 50% of freshmen who signed up for accounting courses would drop out before the first midterm. Nowadays, they somehow struggle through and graduate. The best of them are snatched by the Big 4, the next tier by other large CPA firms and big-time corporations.

The rest end up in the small and midsize businesses and accounting firms. It's my plight to deal with them, exposing myself on daily basis to the devastating result of this natural selection process. In every company I observe the same thing: so much is wrong! The books of different corporations are co-mingled, revenues and costs recognized incorrectly, inventory is not valued properly, etc., etc. It's difficult for an entrepreneurial company to survive in the first place; the accounting incompetence drags them down even further.

Books are kept intuitively, as if rules and standards did not exist. The most shocking thing is that auditors look at all that and accept it. The main concerns appear to be that the bank balances are reconciled to the statements and the control accounts match with supporting schedules. The PRINCIPAL CORRECTNESS is irrelevant.

I give them the benefit of the doubt and let them explain themselves.

Me: Why doesn't your inventory in storage match with the warehouse's records?

Them: Because they don't account for the three lots that already been loaded on the trucks.

Me: Neither should you. That's inventory in-transit, not in storage.

Them (in complete seriousness): Oh, that's what "in-transit" mean.

And I have sad conversations like that practically every day. Pity the well-versed professional!

My book "CFO Techniques" can help these people to improve. Too bad my publishers are not doing match to deliver it into the potential readers' hands.