5 + 5 ÷ 5 = 2 or 6?
Mother: Chinmay, do you know this Australian cricket Glenn Maxwell?
Me: hmm… yes, I know him but I am not sure if he knows me!
Mother: (gave a sarcastic smile)
Me: why? And how do you know his name?
Mother: On this message it says, he was one of the most expensive players bought during this IPL auction.
Me: oh… yes, if I am not wrong it was for $ 2.6 M
Mother: I think you are wrong because here it says $ 1.9 M
Me: hmm… maybe not, I think both of us are right.
Mother: you are like your father. You don’t accept when you are wrong, do you?
Me: (this time I gave a sarcastic smile and reminded myself of the words by Oscar Wilde – “Women are meant to be loved, not to be understood”).
Ma, that $ 1.9 M is it in American dollars or Australian dollars.
Mother: It only has a dollar symbol next to it.
Me: Have they mentioned it in Indian rupees?
Mother: yes, ₹ 14.25 crore
(I quickly converted the amount to USD and AUD)
Me: Ma, as I told you both of us are right. That $ 1.9 M is in USD and I was referring to $ 2.6 M in AUD.
Mother: why can’t they be more specific?
Me: hmm… this is exactly what I keep emphasizing when interacting with people in business.
For some reason many a time we assume that other team members or colleagues or stakeholders also have assumed what we have assumed. This eventually leads to miscommunication, in other words, we are ‘missing the communication’ simply because we are not effectively speaking the language of business i.e., numbers!
Mother: aren’t people in business matured enough to know this?
Me: Ma, thinking people in business are matured enough itself is your assumption!
In fact, I do not think it is about maturity. It is more about common sense that is not very common.
Mother: ha haa… funny.
Me: Ma, let’s try this, how much is 5 + 5 ÷ 5 = ?
Mother: wait… yes, it is 6.
Me: are you sure 5 + 5 ÷ 5 = 6?
Mother: hmm… it can also be 2
Me: so it is 2 or 6?
Mother: I don’t know. You tell me Mr. Financial Educator!
Me: I sometimes ask participants during my webinars/seminars/workshops the same question.
Some say 6, others say 2. Then people who have answered it as “6” justify saying according to the BODMAS rule they are right.
For me, it is not about who is right or who is wrong, it is about ruling out assumptions and making sure we are all on the same page.
As I mentioned earlier, this is what happens in business. People talk about profit, my question is which profit are you referring to – gross profit or operating profit or net profit. If it is about operating profit, is it with depreciation or without it?
Mother: Mr. Trainer, I am neither your participant nor this is a seminar. Please continue watching your cricket and let me continue with WhatsApp.
Me: ok research scholar of WhatsApp university!
If you are a business owner or a key decision-maker in your company, how often do you challenge assumptions and ask for clarification? Or do we prefer to play safe by not asking basic yet obvious questions simply because we don’t want to be perceived as silly or dumb?
Again, it is not about who is right or who is wrong, it is about ruling out assumptions and making sure we are all on the same page.
For example, do you know when ‘Sales’ should be recorded as ‘Sales’, OR do you know when ‘Sales’ is considered as ‘Sales’ in your company?
Is it when the client confirms the order verbally over the phone or via email? Or
Is it when the contract is signed? Or
Is it when the goods or services are delivered? Or
Is it when the invoice is sent? Or
Is it when the client makes the payment?
According to GAAP – Generally Accepted Accounting Principles, it is when the goods or services are delivered. This ‘Sales’ gets recorded on the ‘Profit & Loss Statement’ (also known as ‘Income Statement’) as revenue or income.
I can hear some of you asking – but shouldn’t ‘Income’ be when ‘money comes-in’?
Also, even though ‘Sales’ is recorded as ‘Income’, but the payment might be made by the client after 7 days or 30 days depending on the credit term.
I will stop here as I hope (another assumption) I have made my point?
So, is 5 + 5 ÷ 5 = 2 or 6???
A wise person once said, “Before you ASSUME try this crazy method called ASKING.”
Remember, the word ASSUME itself is conveying that it makes an ASS out of U & ME.
#assume #assumption #neverassume #numbers #financemanagement #bottomline #financeacademy