Day 20 - Budget Burlesque

Accounting wouldn't actually cook the numbers,

but they did agree to tart them up a little.

          Bill got with me first thing this morning about the budgets. They’ve been finished for weeks, but corporate has been toying around with the idea of adding another product line. The new line will be similar to the specialty vehicles we already build, but able to access more forbidding terrain and equipped for more adventurous missions. Neither management nor sales have any idea how many we can sell or how much it will cost to build them, but we’re going to have a go. Before we go, they want to include the new line in the budgets to give them an idea of the outcome, even though it will be a guess at best what kind of impact they will have.

          I’ve been through this kind of thing before. Management gets an idea, and wants to know right away if it’s smart or not. Of course they don’t have enough information to make such a determination, but determine it they will and once it’s determined it will become gospel and people’s jobs will depend on whether or not the company hits the projections that were based on lies, conjecture, and wishful thinking.

          Based on what Bill has told me it will take me about 20 minutes to layer this new substrate of B.S. into the budget. It will be done smartly, with a nicely worded narrative on the assumptions that I will load up with high sounding techno-babble and optimistic phrasing. It will be a beautiful and treacherous piece of work. I told Bill that, if I push, I can probably have it finished tomorrow afternoon.

Financial statements are like women. The more beautiful they are, the more willing are we to believe anything they say. Pictures and graphs in a multitude of pleasant colors, balanced nicely with striking fonts, highlighted in bolds and italics, offset by sufficient white space to make it all seem pure and unaffected--these kinds of effects just suck us in with tease and promise. It’s just a budget, but once it's published its nature changes. It's as if you married a siren beauty, and she turned out to be the harpy of your worst nightmares. Now the promises made are all yours, and you'd better-by-God make them happen.
          Management and the board of directors have already made up their minds what they are going to do. At this point they are just looking for corroboration. The budget will just be telling them what they already believe about themselves—that they are savvy and intuitive businessmen who deserve whatever success comes their way. If I put anything in the budget that suggests otherwise, it would just confirm their wisdom in having fired me for an incompetent dolt who couldn’t see reason. If for some unforeseen reason they fail in spite of the beautiful documents I’m going to give them that will say they won’t fail, why then they’ll just have to fire the incompetent bastards who couldn't execute to plan.

The next time you see a financial report full of attractive graphs and enticing pictures with a narrative explanation by the CEO of the company outlining rosy prospects for the future, think of it like this. That report is the moral equivalent of going to a ‘gentlemen’s club’ and paying a stripper twenty bucks to give you a table dance and talk to you like you are some kind of Adonis. You need only look in the mirror to know that she is yanking your chain in a major way.

Don’t be seduced by the audit report either. The auditors are supposed to ensure that what’s in the financial statements is true. They don’t say that of course. They hedge quite a bit on the true nature of their business in the Auditors' Report, but it’s what everyone expects of them--the truth. The truth gets harder and harder to ferret out the more complicated business becomes. A modern auditor is hard pressed to get it right, and quickly, and under budget, and without getting the client pissed off. That’s why we have spectacular audit failures like Enron and Worldcom and a host of others. In the end, in the grand scheme of things, the auditors’ attestation is loosely analogous to a stripper’s make-up—makes her look better than she does without it, but she’s still what she is, and no matter what she says, she loves your money more than she loves you.