2013

Which of these amounts would you rather pay?

Published on: 18 Dec 2013

Are your clients or customers ever rude to you?

Would you like to encourage them to be politer to you in their dealings with you?

unhappy-coffee-drinerIf you do, then you may be interested in the approach that the La Petite Syrah coffee shop in Nice, France has adopted.

Their pricing policy is pretty unusual and the price you pay for your coffee there depends on how polite you are.

If you walk in and simply order “un cafe” (a coffee) it will cost you €7.

If however, you walk in and say “un cafe, s’il vous plait” (a coffee, please) then it will only cost you €4.25. The accountants amongst you will realise that this represents a cost saving of €2.75 just for saying please.

It gets better though.

If you walk into the coffee shop and say “bonjour, un cafe, s’il vous plait” (hello, a coffee, please) you will get your coffee for €1.40. So, just by saying “hello” and “please” you’ll save €5.60 compared to the €7 “rude” order.

There’s a history of friendly rivalry between the French and the English and I wonder whether this would mean that if you walked in and ordered a coffee in English rather than French it would cost you €10??

Either way, it’s certainly a novel approach to pricing and we wish La Petite Syrah the best of luck with it.

Man’s best friend as well as a money processor.

Published on: 08 Dec 2013

The bond between man and dog can be pretty strong. It’s difficult to be precise about when the relationship first started but common thought is that the grey wolf was domesticated 20 to 30 thousand years ago. Since then the relationship has strengthened.

dog eats moneyWhilst dogs can provide a range of working support to humans (e.g. guide dogs for the blind, search and rescue support, etc) the majority of dogs are simply loved by their owners for being their pet and a cherished member of the family.

Sundance, a 12 year old Golden Retriever, provided his owner with a unique challenge though and no doubt pushed the boundaries of love between man and his dog.

Wayne Klinel from Montana in America left Sundance alone in his car whilst he grabbed some lunch with his wife.

When he returned to the car he found that Sundance had also had lunch. Sundance’s lunch though was more expensive than his owners as the dogs lunch took the form of five $100 notes that Mr Klinel had left hidden in the car.

Alas for poor Wayne all that was left of the notes were small pieces of some $100 notes.

The U.S. Department of Treasury’s does in fact have a Mutilated Currency Division where people can apply to have mutilated currency replaced.

Now this would be an extremely easy “get rich quick” scheme if you could simply write to the Mutilated Currency Division and say that your dog had eaten some money and to request some replacement money.

Instead, you need some form of evidence to support your claim.

So, your dog has just eaten $500 and you need evidence. What would you do?

Well Mr Klinel decided to follow Sundance around and collect his, how can we say it but, collect his little “dog logs”.

Yes, in true dedication to the task, Mr Klinel collected the droppings of Sundance and using an old metal mining screen and a hose he separated out the bits of dollar notes from the rest of the matter.

After cleaning the bits of notes he assembled them as best he could and sent them off to the Mutilated Currency Division.

Despite no doubt being somewhat surprised by the unusual aroma coming from the envelope that the bits of dollar bills were sent back in, the Mutilated Currency Division did the honourable thing and sent Mr Klinel a cheque for the mutilated money.

Is this innovative or scary?

Published on: 19 Nov 2013

I’m not sure about this. Is it innovative or rather scary?

Over in Germany the media company Sky Deutschland has been working with the advertising agency BBDO Germany and they have developed adverts which people will hear “from inside their heads”.

clever-advertisingHearing voices inside your head promoting products probably opens up a big ethical debate but the technology that has been developed enables adverts to be transferred from train windows directly and (rather ominously) silently into train passengers heads.

The idea is that when a person starts falling asleep or resting their head against the window they will hear an advert urging them to download the Sky Go app. The surprising thing is that they will hear it but nobody else in the carriage will hear it (unless of course they are falling asleep against the window as well).

The science behind this involves technology in effect turning the windows into speakers and when a person leans against the window the vibrations in the window travel up the bones on their face into your inner ear and the sound is heard. Similar bone conduction technology is used in hearing aids and Google’s glass headset.

The video below shows more details but I wonder whether this will appear in other places in the future. Is it just a matter of time before you casually lean against the window in the office to hear an advert from your employer telling you how lucky you are to be working there and to stop looking out of the window and to get back to work.

This is how not to be a chairman.

Published on: 18 Nov 2013

Here’s a question for you – if you’re the chairman of one of the leading banks in the UK and that bank holds itself out to be the “ethical” bank what should you do?

chairman-drugsShould you fully take on the responsibility of being the chairman and lead the business forward?

Alternatively, should you buy crack cocaine and crystal meth drugs?

Mr Paul Flowers who used to be the chairman of the Co-Operative Bank was recently filmed buying these hard drugs.

Those of you that are studying finance or business will know that the role of the chairman would typically involve ensuring that the board of directors is effective in its task of setting and implementing the company’s direction. You certainly won’t find buying crack cocaine in any job description for a chairman!

Questions will no doubt be asked as to how 63 year old Mr Flowers managed to get the position of the chairman of such a prestigious bank. He had limited experience in the banking sector and his knowledge of the Co-Operative Bank itself seemed way below what a chairman would be expected to know.

Earlier this month he attended a meeting of the Treasury Select Committee and told the committee that the bank’s balance sheet had £3 billion of assets. The bank did in fact have £47 billion of assets. The chairman of the bank was only wrong by a “mere” £44 billion!

It’s unclear whether or not he was on drugs at the time he gave his answer.

Will this model mean you’ll drink less?

Published on: 15 Nov 2013

It’s one of the classic economic models. Changes in supply and demand can impact on prices but should you be interested in this model if you like to drink a glass of wine?

wineMorgan Stanley, the American financial services firm has released a report on global wine supply and demand. Assuming that you haven’t had too much wine to drink already today then it does make some interesting reading.

First of all, global wine consumption has generally been rising since 1996 and the current consumption is approximately 3 billion cases per year.

This consumption (demand) of 3 billion cases of wine compares to the current production (supply) of 2.8 billion cases of wine. Unless you’re now on your second bottle of wine of the day you’ll be able to work out that demand exceeds supply by 200 million cases.

The report by Morgan Stanley predicts that in the short term “inventories will likely be reduced as current consumption continues to be predominantly supplied by previous vintages”.

In other words, the shortfall between annual demand and supply will be satisfied by wines that were produced in earlier years.

Once this stockpile has been used though it will simply be a case of demand exceeding supply and we all know what happens when demand exceeds supply. Yes, prices will increase.

If you’re a wine drinker then you’re likely to be facing a more expensive drinks bill in the future.

Those budget review meetings can get rather exciting…

Published on: 10 Nov 2013

Companies have a duty to look after their employees in the workplace but what about looking after them whilst they are in bed?

broken-noseAn Australian government employee was visiting a regional office as part of the budget review process and was staying in a hotel room which had been booked by her employer.

It appears that there was nothing of any great interest on the TV that evening as rather than settle down and watch television and enjoy the hotel mini-bar she had sex with a colleague she had invited into the room.

Things took a turn for the worse though as during the throws of passion a light fitting was pulled from the wall and fell onto her face injuring her nose and mouth (as an aside it’s unclear who was responsible for breaking the light fitting as the court transcripts highlighted that the fitting was pulled from its mount by either the woman or her acquaintance).

The evening’s entertainment was brought to a sudden end by the broken light fitting though as the lady needed hospital treatment.

After she had recovered she brought an employee’s compensation claim against Comcare (the government’s insurer) and in December last year she was in fact granted compensation by the Federal Court.

Comcare was perhaps understandably upset about the decision to award compensation and appealed against the decision.

They were successful in their appeal as yesterday, the High Court reversed the decision of the Federal Court and passed a ruling that shows that in order to be eligible for compensation Australian workers must be “expressly or impliedly induced or encouraged by the employer” to undertake the activity which leads to injury.

There was no evidence that her employer, the Australian government had induced or encouraged her to undertake the activity that led to the broken light fitting.

Is Heinz a bitter taste for McDonald’s?

Published on: 04 Nov 2013

They’ve been together since the Second World War but going forward Heinz tomato ketchup will no longer be on the McDonald’s menu.

tomato sauceSo, what has caused McDonald’s to drop Heinz Ketchup?

It’s down to the intense competition that exists between McDonald’s and Burger King.

Earlier this year, Heinz was taken over by Warren Buffett’s Berkshire Hathaway and the Brazilian investment fund 3G in a $28 billion deal. The new owners of Heinz put Bernardo Hees, former chief executive of Burger King in charge of Heinz.

Earlier this week McDonald’s announced that “As a result of recent management changes at Heinz, we have decided to transition our business to other suppliers over time”.

It’s interesting though as if you look deeper into the relationships you’ll find that as well as having a stake in Heinz, investment fund 3G also controls Burger King.

It arguably makes sense therefore for McDonald’s to drop Heinz as otherwise there would be the risk that by having Heinz as a supplier, McDonald’s would be increasing the profits of Heinz who in turn could remit those profits to 3G who could then use the funds to strengthen Burger King to win market share from McDonalds.

So there you go and the next time you’re munching on your Big Mac and realise it’s no longer Heinz Ketchup with it you’ll know why.

The Vatican Bank publishes its first set of accounts.

Published on: 29 Oct 2013

The Institute for Religious Works, or as it is more commonly referred to, “The Vatican Bank” has released its first set of published accounts.

The report comprises a hefty 100 pages and contains some interesting figures.

the-vatican-bankThe bank’s balance sheet total was €5 billion and it had a net profit of €87 million in 2012. This was more than four times the profit it had in 2011.

So, what has caused the increase in profit?

The report highlights that the banks economic performance was “driven above all by the development of interest rates in the Eurozone”.

Interest rates fell across the Eurozone in 2012 and the Vatican has nearly €3 billion in trading securities, most of which are government and index bonds. As interest rates have fallen in Europe, the value of the bonds they hold has increased.

A simple example to illustrate the increase in the value of their bonds as interest rates have fallen would be if they held a bond with a nominal value of €100,000 with a fixed interest rate of 4% they would be guaranteed to receive €4,000 of interest. If the market interest rate subsequently fell to 2% they would still be entitled to receive the fixed €4,000 of interest. The fact that interest rates are now only 2% means that the bond would have a market value of €200,000 (i.e. to get €4,000 of interest at a 2% rate you would need to invest €200,000)

As a result of the fall in interest rates the value of the Vatican’s fixed income holdings is up by in excess of €50 million.

The report also reveals the bank had €41 million in gold, coins and other precious metals, a stake in an Italian real estate company and it received two inheritance properties worth approximately €2 million.

If you’re interested in looking at the full report, here is a copy of the Vatican Bank’s published accounts.

Does it matter if the swimmers are naked or not?

Published on: 28 Oct 2013

During the summer holidays at university I was lucky enough to have a temporary job as a life guard at the local swimming pool. Thankfully there were no emergencies and the most exciting thing that happened was when a locker became jammed.

businessman-in-poolI graduated from university and now I’m an accountant. My job now involves looking at figures on spreadsheets rather than figures in the pool.

In Austria, the management of Vienna’s public swimming pools carried out a survey and found that bathers were consuming on average 5,000 litres of chlorinated pool water a day.

5,000 litres of water a day is a significant amount of water. Looking at this from a finance point of view this in turn means that this is a significant amount of cost in replacing the water. In addition, the authorities have to spend £20 per day to replace the chlorine that disappears with the water.

How come so much water is being lost? Surely the swimmers are not drinking the water and it would take an awful lot of splashing to lose that amount of water.

The answer is that apparently a lot of water gets removed from the pool via the material of the swim wear. When a person wearing Boardshorts for example leaves the pool 2.5 litres of chlorinated water is trapped in the material and is removed from the pool.

So, picture the scene. You’re an accountant at a sports complex and are attending a meeting to discuss cost saving initiatives for the year ahead.

Given the above findings then would a cost saving solution be to suggest that swimwear should be banned?

Now whilst this would save the cost of chlorinated water being replaced I think the number of swimmers would decline dramatically.

Importantly though I think they would save on the cost of your salary as you probably wouldn’t be in the job for much longer after that suggestion.

London cab drivers, “the knowledge” and mixed costs…

Published on: 24 Oct 2013

I think that London taxi drivers are brilliant. There’s never a dull moment and if you want a conversation you’ll certainly get one when you’re in a black cab. To be honest, half the time if you don’t want a conversation you’ll still get one.

london-taxiLondon cab drivers have to pass rigorous tests before they are licensed to drive a black cab. “The knowledge” is a term used for the exams that the drivers have to pass and ensures that they know their way around the streets of London without having to refer to satnav systems or maps.

My own personal view though is that “the knowledge” also refers to the fact that the drivers generally have a strong opinion on most things and seem to know everything about everything! To be fair I was quite impressed with the driver of the cab I was in last night. When he found out that I taught finance he went on to point out that the taxi fare I was about to pay him was classified as a “mixed cost” as it was partly a fixed cost (the minimum fare) and partly variable (the charge per mile traveled).

I’ll give him credit where it’s due as he was absolutely right. Fortunately for him though the journey came to an end before I could test him on other costing methods…

The ExP Group