Rule of Thumb
May 30th 2008 11:22
Just sometime ago I watched Sir Richard Branson saying on TV that he did all his business deals on a rule of thumb basis and that only later accountants were called in.
This makes sense to me but when I was an accounting student they told me to distrust management’s “gut feeling” and “rule of thumb”. What accountants must do, my lecturers preached, is to provide precise, well calculated figures that management can use to plan and evaluate operations. Fine, I thought.
But consider these precise figures on the area of statistics relative to a hypothetical company: the average number of customers who bought our new product is, exactly, 10.5. You could easily say that ten whole customers is alright, but ½ customer stretches the imagination, yet the figure would be precise. Or is it overkill?
All this might make sense for an accountant but it also makes it obvious that business leaders are there to make business deals, which they often do, and accountants to count money, which they know well how to. This way it all falls in place.
This makes sense to me but when I was an accounting student they told me to distrust management’s “gut feeling” and “rule of thumb”. What accountants must do, my lecturers preached, is to provide precise, well calculated figures that management can use to plan and evaluate operations. Fine, I thought.
But consider these precise figures on the area of statistics relative to a hypothetical company: the average number of customers who bought our new product is, exactly, 10.5. You could easily say that ten whole customers is alright, but ½ customer stretches the imagination, yet the figure would be precise. Or is it overkill?
All this might make sense for an accountant but it also makes it obvious that business leaders are there to make business deals, which they often do, and accountants to count money, which they know well how to. This way it all falls in place.
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