Who’s Minding the Storeroom?

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We love our office coffee. In my opinion, the entire American economy would collapse without it. Not pursuant to the sale of beans or nondairy creamer, but from the sheer national lassitude that mass coffee deprivation would impose on our millions strong workforce.

But office coffee, like everything else in the world, has a price. It can have a good price, a fair price, or a bad price. A good or fair price is desirable. A bad price is catastrophic. Too strong a word? I don’t think so. In fact, I believe that paying a bad price, i.e. overpaying, for anything that helps your office run is catastrophic. Why? Because it’s a lot easier to step into a hole than to step out of a hole. Here’s a true example.

The staff accountant for one of our clients heard a pitch for a new coffee service and liked what he heard. He asked for an estimate from the coffee service. The coffee service gladly supplied him with an estimate for $80 a month. The accountant showed this estimate to the CEO, the CEO wanted to reward his staff with the improved coffee service, and the deal was struck.

Turns out it was pretty good coffee. Little individual containers that brewed individual cups of all manner of delicious coffee flavors from around the world — Hazelnut, Costa Rican, Kona, you name it. Even exotic teas. Everybody loved it.

Then one day the CEO was passing by the accountant’s desk and saw an invoice from the coffee service for $300. “Is this for three months?” asked the CEO. “No,” replied the accountant, “That’s just for one month.” That’s when the grounds, so to speak, hit the fan.

Who’s the bad guy here? The coffee salesperson … for presenting a lowball estimate? Probably. My guess is that the estimate was based on how much coffee the office staff was drinking before the new coffee options became available. Is the accountant at fault? Definitely. Why? Because the accountant didn’t mention the cost discrepancy until the CEO called him on it. Is the CEO to blame? Nominally. He can be blamed for trusting an accountant to maintain the original $80 per month cost.

Is paying an extra $220 a month for coffee going to put this company out of business? Not necessarily, but the lesson to be learned here is this, and it’s important … if you’re paying more than 200% over the budgeted price for ANYTHING, from coffee to consultants, and you are unaware of it … then you are headed for catastrophe. In a hurry. And it’s the responsibility of your accounting staff to IMMEDIATELY make you aware of any discrepancies between budget and spend. If your team withholds vital information because they don’t want to give you any “bad news” then you have a serious problem. Because bad news is part of business. We all get bad news on virtually a daily basis. It’s how we react to bad news that divides the business world into winners and losers. But even the best business minds in the world can’t react appropriately to bad news … if they don’t get the information at all.

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