One of my favorite Monty Python works, is the famous “Accountancy Shanty” coming from Monty Python’s Meaning of Life. With the lyrics “It’s fun to charter an accountant and sail the wide accountant-sea,” it’s obviously a satirical look at the idiosyncracies of your friendly neighbourhood bean counter.
Five Accountant-ish Things for Librarians to Know
Well, put your accountant jokes aside. Accountants know things that librarians also should know about. Here are five examples:
- Relevant Costing
The Principle: Poor decisions in the past should not effect future cost decisions.
A key priority for your library is the quick circulation of books, DVDs and whatnot. You spent $50,000 on a design for a circulation desk that has made your library’s ability to circulate books even worse. Another product comes along that will improve circulation, but involves losing the old design and spending another $10,000. Whether or not you decide to spend the $10,000 would depend on a lot of things, but the most important thing you should *not* say is “but we invested $50,000 in the old machine, we can’t lose it now.”
You can’t take back a bad decision. Mistakes can be embarrassing and hard to admit, but you can make the problem worse by letting past mistakes impact future correct decisions. While you can learn from mistakes, you should do your best to make sure they do not have a continued lifecycle in your organization. Some times its just better to let go.
- Gross Margins
The Principle: In business, it’s a measure of your revenue over your cost of good sold; in a public organization, you could think of your margins as the value to the user divided by the budget you put into the service.
There are two ways to see margins in a library context. 1) You provide a service that patrons love, but for reasons outside your control costs keep creeping up. 2) Costs remain the same to provide a service, but the value to the customer drops over time.
Margins are something to be watched over time. In a business, your margins show the “markup” of your sales per-unit. When these decrease over time, it suggests that managers ought to find ways to reduce product cost — usually through innovation of some sort.
In libraries margins are harder to quantify but that does not mean they are not relevant. Seeing an overall service that uses up the same amount of budget, but appears to lack its old lustre is also a sign that creative heads should bang together for ways to improve the service.
- Current Ratio
The Principle: Your current assets (mostly cash) over your current liabilities (payable accounts etc.) that measures a firm’s ability to cover short-term debt obligations.
A general rule of thumb for your average business is that your current assets ought to be twice that of the current liabilities. This basically means that if you want to close up shop, you can do so fairly quickly.
Flexibility is a key component of a good library service. The best projects are the ones you can close up quickly when things do not work out, or priorities change. It’s very important to have a few added resources on hand to adapt to user expectations when you are launching something out into the world.
- Net Present Value
The Principle: You should always take a lump sum of cash now versus the same amount of cash provided over a period of time (present value); you need to consider the time value of money when you make costing decisions.
Two vendors are offering an equal product. One asks you to pay $10,000 up front, with no payments later on; the other wants to charge you $15,000 over 5 years ($3000 per year). Which one should you go for?
That would depend on one essential variable: the interest that you could make on the money you spent over time. With an assumed 5% interest rate, the value of $10,000 in five years would be $15,591 over 5 years. A $3000 investment over 5 years on the other hand would be slightly less at $15,576. The bottom line, however, is that you could always take your money and put it into a bank to collect interest. If your projects do not provide more value over time than what you put into them, then you should not do them.
Understanding the importance of time on the value of a dollar can be very helpful. Pumping large amounts of money into an investment that will produce the benefit over a long period of time may not be as effective as a sustained small investment with immediate and logical benefits. While large, expensive projects can certainly boost a resume, you can provide better bang for buck to your patrons by offering simple, adaptable and logical services over time. That’s why open source hell (offering open source projects that require later investment of resources) may not be as bad as expensive proprietary hell (expensive projects that may stay fresh longer).
- Opportunity Costs:
The Principle: The true cost of an activity is equal to the value of doing the next best alternative.
By choosing to go to graduate school for two years to become a librarian, you gave up two years worth of a potential non-librarian job (plus the advances in pay/experience/seniority that go along with that job). That’s fine if your librarian earnings now make up for that lost revenue; it’s not if you could have been making more. Also, you do not have to think about it always in terms of money. You could think about it in terms of the happiness lost because you couldn’t join the yacht club/drink more beer/start a family sooner.
Anything you choose to do (or not) has a cost in that you could be doing something else with the same time and resources. Lots of time spent on pet projects with marginal value has a cost equal to that of the project you could be doing if you were not doing the current project.
Innovation can be another factor. Put your employees to work on mundane projects with no learning value and you could be risking the benefit of skills and knowledge that come with doing exciting and innovative work. All in all, thinking about what else you could be working on is an essential skill that librarians can learn from accountants.
Just because people come from a different environment does not mean that libraries cannot learn from them. Learning from other groups can make librarians better. Accountants are one of these groups. Can you think of other professions we can learn from?