The following appeared in a memorandum from a member of a financial management and consulting firm:
“We have learned from an employee of Windfall, Ltd., that its accounting department, by checking about 10 percent of the last month’s purchasing invoices for errors and inconsistencies, saved the company some $10,000 in overpayments. In order to help our clients increase their net gains, we should advise each of them to institute a policy of checking all purchasing invoices for errors. Such a recommendation could also help us get the Windfall account by demonstrating to Windfall the rigorousness of our methods.”
Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.
The argument assumes that there are errors on some invoices, and that those errors have cost the company some amount of money. Even assuming that statement to be true, it does not follow that the company would save money by instituting a policy of checking all invoices. In fact, checking 10 percent would be very time consuming and would consume resources that could be used more productively elsewhere. Even if that policy were to be instituted, the company would be losing out on the benefits of having qualified employees, such as its chief financial officer (CFO), look at the other 90 percent of invoices, which would probably yield valuable results. For example, the CFO might notice an error in the billing for office supplies, which had not been checked. That error could be corrected, and the employee who did order the supplies could be reimbursed for the overcharge. By instituting such a policy, the company would be wasting valuable time, and any savings would be minimal
The argument also assumes that the CFO’s 10 percent check would convince the company that the firm’s accountants are thorough. That assumption would be a stretch, since the company may be reluctant to change its accounting practices, and may have changed them long ago. Even if the company were to change its accounting practices, the CFO’s check might not result in any cost savings. For example, if the CFO notices a charging error on an invoice, the remedy might be for the company to buy the same item from a different vendor or ask another employee to review the invoice. If either of these actions were taken, the company would lose out on the overcharge, and the CFO’s check would be rendered pointless
The real reason the CFO is recommending checking invoices is because the company might benefit from increased profitability. However, that benefit might not accrue to the company, but to the employees. The company could institute such a policy, but employees would need to find other jobs. Instead of employees working fewer hours, the company would reduce its payroll, which would cost more. The company could also reduce its overhead, but employees would have to pick up the slack. The employees’ pay would be lower, and they would be less likely to invest in their own educations through continuing education. If the company were to increase wages, employees would demand higher salaries, which would drive other employers out of business. Thus, the CFO’s proposal would not help the company to increase its profits, but to drive down wages
Finally, the claim assumes that checking invoices would improve the company’s relationship with Windfall, Ltd. However, that may not be true. Windfall, Ltd., will not continue to do business with a company whose accountants do not check invoices thoroughly. The company may, however, continue doing business with a company that does check invoices thoroughly, and that company may someday need Windfall’s business. In that case, a company’s accountants would be wise to keep a watchful eye on invoices, and to institute a checking policy, even if it did not benefit the company.