Saving the pennies

We know the saying “if you look after the pennies, the pounds will look after themselves”.  This might be a principle for every business.

I was surprised to hear a client saying she usually throws away pennies and two-pennies, because it wasn’t worth the effort of keeping them.  “You can’t buy anything with a penny” she said. “You can’t even save up a handful and put them in a parking meter, because the machine won’t accept them.  I can’t believe they are still making new ones” she said, holding out a shiny newly-minted coin, before tossing it in a bin.

There is truth in this too – we can waste time on small-value things.

Look for what matters

There are techniques used by accountants, auditors and actuaries which focus on high-value items.  HMRC uses similar techniques – by looking at high-value transactions, they are more likely to find high-value errors.

When you cast your eye over your profit and loss figures, you look more at the large figures – of course.  You can apply this technique easily in other ways.  Suppose your gross profit is falling, and it’s not obvious why.  It is easy now to get the numbers into a spreadsheet, where you can do things like sort from high to low value.  You would start with the high-value sales, and check the gross profit on those, then maybe sort by gross profit percentage, and sort by those to find the lowest percentage.  Each result tells you something, or provides evidence to explain to someone else.

You could take your stock valuation and see how much you are holding in low-value items.  For those things, the cost may not be the thing itself, but in getting the goods to your premises, displaying them, post and packing them to a customer, and the time you spend on this.  Therefore if you were to double the price of the thing itself, your customers may still buy them, because it is not just the thing itself, but the availability they are buying, or being able to get it now.

And as for throwing away the pennies – if a charity finds it worth their time collecting and banking them (bank charges ?), that’s great and makes us feel better, but if not, was our client right to throw them away?  “Don’t sweat the small stuff”.

By the way, I once put thirty 5-pence pieces in a parking meter, but when I put in the thirty-first one, they ALL came out again.  The people who make parking meters don’t want small stuff.


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