#54 - Let's have some resilient fun: How much details do you need?

"Let's have some resilient fun" shows some important topics in a more relaxed and joyful way. After all, humour is quoted as a desirable characteristic of resilient individuals like us!

The Story of Some Bags of Peanuts

I received this request many years ago from a very diligent office manager. It summarizes the never-solved dilemma of managerial accounting:

The level of details vs. usefulness of the outcomes.

A higher level of detail gives a false sense of control and creates more work. Cost allocation is time-consuming; even if one can automate journal entries in the system, someone still needs to regularly review allocation keys and reconcile accounts, which become more difficult to understand.

At the same time, we in finance are bombarded with many questions—more often than we'd like—questions that are neither particularly useful nor smart but still need to be answered. If finance does not create a sufficient level of detail in the system design, it will end up reviewing costs invoice by invoice to answer detailed questions.

So the sweet spot should be somewhere in the middle: enough accounts and departments in the accounting system to answer important business questions and make decisions, but not so many that the system becomes overly messy and difficult to maintain.

At the end of the day, what kind of decisions can we make based on information about, for example, peanut consumption habits in different departments? Can we ask a particular department to eat fewer peanuts during meetings?

Another point of view on the level of detail is fairness. Why should we have equal allocation if some departments consume more? Fairness in the workplace is a great concept—very catchy—it can be effectively used to force your views if you don't have business arguments. If you feel threatened in a meeting, you can raise the issue of fairness and have a good chance to stir the pot.

Solution

Maybe the fundamental question for each inquiry should be:

What kind of business decisions can we make based on that information?

This question can help steer management information in the right direction. Yet, we must acknowledge that people love to ask questions—they feel more important if they delve into the uncharted territories of peanut finance. They're just curious and want to know.

So next time someone requests an exhaustive breakdown of peanut expenses, perhaps offer them a peanut, share a smile, and gently redirect the conversation to more pressing matters.

What are your experiences with this, and how do you handle questions that force you to add another level of detail to your management information system?

Disclaimer: This post is satirical. Any resemblance to actual management techniques is purely coincidental and frankly, a bit concerning.

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