Methodology
The arithmetic behind the cost of chaos
Six numbers you supply, two assumptions we added, ten figures that come out. This page prints all of them, so the calculator stops being a box you type into.
There is no benchmark in this model and no coefficient of ours. Every figure it returns is one of your numbers multiplied by another of your numbers, and the two numbers on the page that are not yours — the working weeks in a year and the length of a full-time week — sit in open fields you can overwrite.
Outputs
Every figure the calculator prints, and the arithmetic behind it
Ten figures come out of six of yours and two of ours. Nothing else is involved at any point.
| Figure | How it is calculated |
|---|---|
| Hours a week spent reconciling | people × hours a week each |
| Hours a year spent reconciling | hours a week × working weeks in a year |
| Reconciliation cost, per year | hours a year × loaded hourly cost |
| Rework, per quarter | rework events last quarter × average value of one event |
| Rework, per year | rework in the quarter × 4 |
| Days a year the month is not closed | days to close the month × 12 |
| Working days in a year | working weeks × 5 |
| Share of the year the month is not closed | days not closed ÷ working days in a year × 100 |
| Full-time equivalent | hours a year ÷ (a full-time week × working weeks) |
| The headline figure | reconciliation cost for the year + rework for the year |
The headline figure, written out in full
- people × hours a week each × working weeks × loaded hourly cost
- + rework events × average value of one event × 4
- = the figure at the top of the result
Assumptions
The two numbers on the page that are not yours
The calculator opens on 46 working weeks in a year and a 40-hour full-time week. Both are ours, both are stated on screen under a panel headed “Assumptions we added”, and both are ordinary editable fields — a reader who works 48 weeks types 48 and every annual figure on the page moves with it.
The working weeks do real work. They turn the weekly hours into annual hours, and they also set the working days in a year, which is the denominator under the share of the year the month is not closed. The full-time week does one job only: it converts the annual hours into a full-time equivalent, and that figure is never added to anything.
Two guards sit under the two divisions. If the working weeks are zero, the share of the year is reported as 0 rather than as an error; if either the full-time week or the working weeks are zero, the full-time equivalent is reported as 0. Both denominators are numbers the reader controls, and a page that answers a typed zero with an infinity has stopped being a calculator.
Anything typed into a field that is not a number, or is a negative one, is read as zero.
The headline
What the headline adds up, and what it only describes
Two of the ten figures are added together. The other eight are printed beside them and never enter the total.
Added into the headline
- The reconciliation cost for the year.
- The rework for the year.
Printed, never added
- The hours themselves. They are the same hours the reconciliation cost has already priced, and adding both would count them twice.
- The full-time equivalent, for the same reason: it is those hours divided by a full-time week, not a further cost.
- The close-cycle figures. A month that takes ten days to close has a cost, this model does not know what it is, so it describes the window rather than pricing it.
Bounds
Where the model stops
Six things it does not do. Each one is a place where a real figure would be higher, lower, or simply different.
- It annualises a single quarter. Rework is asked for over the last quarter and multiplied by four, so if that quarter was unusually quiet the annual figure is low — the calculator says as much next to the result.
- It assumes a five-day week. The working days in a year are the working weeks multiplied by five, and that is the only place the shape of a week appears anywhere in the model.
- It assumes every month closes the same way. The days to close are multiplied by twelve, so a year with one brutal audit close and eleven quick ones produces exactly the figure of a year of identical months.
- It says nothing about recoverability. The total is what the work costs today, not what any change would give back — the share a new system removes is a separate question, and it is asked on the payback calculator instead.
- It counts nothing it cannot multiply. Decisions taken late on numbers that were not final, customers who did not come back after the second corrected invoice, and the people who left are all real costs, and the calculator prints a sentence saying so rather than a figure.
- It contains no benchmark. There is no “companies like yours” anywhere in the model, because we would have to invent it.
Cost of Chaos
Argue with a line, not with the answer
Every step is on this page so that it can be disputed. Tell us which one is wrong for your operation and we will tell you what we would put in its place.
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