It may sound silly but it is true and we all know it: You can’t make money by going broke. Yet what we say we believe or know and what we actually do are often different things.
I frequently get a request to approve a new expense—one not already in the budget for the year—with the explanation that net income in the approved financial plan will be reduced by the same amount. I love to ask why? People new to this tend to look confused and reply because that is what it costs.
To which I reply: “The correct question should be how much is net income going to go UP if I approve this request? Because if this new expense does not make us money, we should not do it. If an expenditure does not produce a return, then it is not a wise use of resources.”
There are always exceptions of course:
• It may be for a meaningful life-safety issue.
• It is possible that this expenditure, while not adding to income will prevent the loss of even more income (this one is the most overused of all).
• The return will come over several years. The additional income will come over the next 3 years. Good answer but need to see some offset in the current year for it to be believable.
The trouble is that even with the best of intentions, the exceptions can quickly become the rule and you end up running a substandard operation because you lacked fiscal discipline, the ability to say no.
Just as work ALWAYS expands to fill the time available, so do all available resources become consumed before human ingenuity, entrepreneurship, and creativity fully kick in. It is challenge that brings out our best.
“No one ever went broke by saying no too often.” — Harvey MacKay; 1932–, businessman, columnist, and author
“Beware of the little expenses; a small leak will sink a great ship.” — Benjamin Franklin; 1706–1790
“Proportion your expenses to what you have, not what you expect.” — English proverb