Jack TenneyExtra Point

by Jack Tenney, Publisher

December 2013

Business time

A fellow says to an attorney, “I would like to ask you two questions.” The attorney says, “Shoot!” The guy says, “Will you charge me for this?” The lawyer says, “Yes. What’s your other question?”

Which brings me to two accounting solutions to business time problems.

The calendar is a bear. February, for instance, is short, often cold, and has a national holiday. August, on the other hand, is long, often hot, and has no holiday. However, if the business pays rent, leases equipment, or pays salaries on a monthly basis and all other things are equal, February sucks when compared to August.

Manufacturing companies concerned with the effect of February-August differences on product costs use calendar variances. By dividing annual budgets by planned productive hours, pieces and parts produced in winter cold or summer heat bear equal overhead burdens. This obviates explanations that February is lousy because it’s short, dark, cold — whatever.

Service businesses often adopt the 4-4-5 approach to bean counting. (As a former CPA, I have never been fond of the term bean-counter, especially when used to denigrate the art and science of accounting devices used to measure the performance of people who say “bean-counter.”) Anyway, the 4-4-5  is a method of counting weeks so each quarter has exactly 13 weeks and every year has exactly 52. Because this system consists of 364 days, every few years the last week of the last quarter gets to run six weeks instead of five.

Knowing when to use that extra week is an art somewhat like knowing when to flip the steak on the grill or how long to soak the beans before adding the molasses. Folks like me are good at it.