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Salary and benefits come out of a different bucket than office equipment and installations.

by bovermyer 7y ago

chrisseaton 7y ago
So what?
- bovermyer 7y ago
  It matters in this case because the discussion took a turn towards comparing the compensation of staff to the provisioning of the office environment. In that context, companies' consideration of expenditures will take into account capital versus operational categories.
  - chrisseaton 7y ago
    Why does it matter? It's all the same money no matter which budget it comes out of.
    - bovermyer 7y ago
      No, it's not. Capital expenditures are reported differently and held to different standards and strategies.
      - chrisseaton 7y ago
        But if you have a million in funding, then who does it matter to if you spend it on infrastructure or operational expenses? You're still burning the same amount of cash.
        deleted 7y ago
        [deleted]
        athriren 7y ago
        It matters a lot to your board, your creditors and investors, the government. If you’re publicly held, it matters to a significantly larger number of investors and changes your legal obligations somewhat. If you’ve ever heard someone talking about “the color of money” in a business context in regards to different types of incoming and outgoing accounts, this is what they’re talking about. Whether capex is better or worse than opex from any particular vantage point is so heavily context dependent that I’m unsuited to provide a general overview, but it is easy to see how it could matter when you compare expenses attributable to salary vs expenses attributable to the purchase of real property in much the same way it matters to you as an individual whether you used your finances to buy a house or pay someone to mow your lawn.
        outworlder 7y ago
        You are trying to rationalize this. Don't. Companies work under their own rules and are not rational actors.
        owenmarshall 7y ago
        Salary and benefits aren’t treated exactly the same as capital expenditures. That’s how your purchase of a ten thousand dollar piece of electronics becomes a thousand dollar charge every ten years, no matter when the check clears. Which looks better on your companies balance sheet? Have you ever tracked your time as a salaried software developer? I used to, and used to think it was a stupid exercise. Then I learned that my payroll costs were being capitalized against the project in development. Two years later when the project launched, it hit the books and started deprecating over seven years. That meant my company essentially had two years where my salary wasn’t on their books; when it hit, those two years were skewed over seven. Have you ever had to differentiate between tracking time spent doing development and time doing support? Support is an ongoing operational expense that can’t be capitalized. Same pot of money, vastly different ways to split it up.
        TurkTurkleton 7y ago
        I am a salaried software developer, and my employer requires me to track my time, for precisely the reason you describe. And I still think it's stupid, despite having heard this very explanation at least twice (or thrice, if you count your comment). It doesn't make it make any more sense; it just makes corporate accounting sound like so much smoke and mirrors that accountants and investors willfully participate in. Maybe I'm focusing too much on the fact that those dollars are coming out of their bank account into mine every two weeks like clockwork regardless of the fact that they're pretending that they're trickling two years' worth of salary out to me slowly over a period of seven years or whatever, but it just seems so arbitrary and nonsensical to pretend that they're not spending that money to pay me right now.
        owenmarshall 7y ago
        > those dollars are coming out of their bank account into mine every two weeks like clockwork Would it make you feel better to consider that those dollars aren't really coming from their bank account in any meaningful sense? They're almost always from a large creditor who extended a line of credit, or from the sale of unsecured debt against the company if you're big and bad enough. And that their "bank account" is almost entirely divorced from cash on hand, and it's built up from money other businesses and customers owe them for services? We assume that businesses are going to be in business for the foreseeable future, that they'll pay their debts and collect profit on their assets and the world keeps moving. In that sense, corporate accounting isn't the smoke and mirrors; it's the way we give that assumption some basis in reality. We assume that your business will stay in operation and sell the product you helped build, so why penalize them for not being able to get money before the asset is built?
    - mediaman 7y ago
      He's explaining why it matters organizationally. Organizations aren't rational; they're a product of their structure and incentives.
    - rrix2 7y ago
      It matters in this conversation because it's NOT the same pile of money to the people making decisions about the office space, nor to the people in charge of hiring. Those people are allotted certain budget for the buildout of their roles and expected to justify budget increases, irrespective of other piles of money.

Salary and benefits come out of a different bucket than office equipment and installations.

chrisseaton 7y ago

So what?

bovermyer 7y ago
It matters in this case because the discussion took a turn towards comparing the compensation of staff to the provisioning of the office environment. In that context, companies' consideration of expenditures will take into account capital versus operational categories.
- chrisseaton 7y ago
  Why does it matter? It's all the same money no matter which budget it comes out of.
  - bovermyer 7y ago
    No, it's not. Capital expenditures are reported differently and held to different standards and strategies.
    - chrisseaton 7y ago
      But if you have a million in funding, then who does it matter to if you spend it on infrastructure or operational expenses? You're still burning the same amount of cash.
      - deleted 7y ago
        [deleted]
      - athriren 7y ago
        It matters a lot to your board, your creditors and investors, the government. If you’re publicly held, it matters to a significantly larger number of investors and changes your legal obligations somewhat. If you’ve ever heard someone talking about “the color of money” in a business context in regards to different types of incoming and outgoing accounts, this is what they’re talking about. Whether capex is better or worse than opex from any particular vantage point is so heavily context dependent that I’m unsuited to provide a general overview, but it is easy to see how it could matter when you compare expenses attributable to salary vs expenses attributable to the purchase of real property in much the same way it matters to you as an individual whether you used your finances to buy a house or pay someone to mow your lawn.
      - outworlder 7y ago
        You are trying to rationalize this. Don't. Companies work under their own rules and are not rational actors.
      - owenmarshall 7y ago
        Salary and benefits aren’t treated exactly the same as capital expenditures. That’s how your purchase of a ten thousand dollar piece of electronics becomes a thousand dollar charge every ten years, no matter when the check clears. Which looks better on your companies balance sheet? Have you ever tracked your time as a salaried software developer? I used to, and used to think it was a stupid exercise. Then I learned that my payroll costs were being capitalized against the project in development. Two years later when the project launched, it hit the books and started deprecating over seven years. That meant my company essentially had two years where my salary wasn’t on their books; when it hit, those two years were skewed over seven. Have you ever had to differentiate between tracking time spent doing development and time doing support? Support is an ongoing operational expense that can’t be capitalized. Same pot of money, vastly different ways to split it up.
        TurkTurkleton 7y ago
        I am a salaried software developer, and my employer requires me to track my time, for precisely the reason you describe. And I still think it's stupid, despite having heard this very explanation at least twice (or thrice, if you count your comment). It doesn't make it make any more sense; it just makes corporate accounting sound like so much smoke and mirrors that accountants and investors willfully participate in. Maybe I'm focusing too much on the fact that those dollars are coming out of their bank account into mine every two weeks like clockwork regardless of the fact that they're pretending that they're trickling two years' worth of salary out to me slowly over a period of seven years or whatever, but it just seems so arbitrary and nonsensical to pretend that they're not spending that money to pay me right now.
        owenmarshall 7y ago
        > those dollars are coming out of their bank account into mine every two weeks like clockwork Would it make you feel better to consider that those dollars aren't really coming from their bank account in any meaningful sense? They're almost always from a large creditor who extended a line of credit, or from the sale of unsecured debt against the company if you're big and bad enough. And that their "bank account" is almost entirely divorced from cash on hand, and it's built up from money other businesses and customers owe them for services? We assume that businesses are going to be in business for the foreseeable future, that they'll pay their debts and collect profit on their assets and the world keeps moving. In that sense, corporate accounting isn't the smoke and mirrors; it's the way we give that assumption some basis in reality. We assume that your business will stay in operation and sell the product you helped build, so why penalize them for not being able to get money before the asset is built?
  - mediaman 7y ago
    He's explaining why it matters organizationally. Organizations aren't rational; they're a product of their structure and incentives.
  - rrix2 7y ago
    It matters in this conversation because it's NOT the same pile of money to the people making decisions about the office space, nor to the people in charge of hiring. Those people are allotted certain budget for the buildout of their roles and expected to justify budget increases, irrespective of other piles of money.