Making decisions means making good assumptions

Just before Christmas, Joe and I installed a spa on our new deck.  The spa had been in the lower floor ofthe house.  This was not a good idea in Pennsylvania.  Then two things happened in quick order.  (1) We got our first electric bill with the spa outside and the truly cold weather having arrived.  Bill went up a bit, as expected, but not enough for real concern.(2)  One month leter we got our first bill with the spa outside, the cold weather,  AND the rate increase.  We have a full electric house (gas is not available,  I hate fuel oil, a furnace would require taking down ceilings installing ductwork, and I'm away too much for a wood or coal burner to make sense).  It was a shocker!. 

Next step was to investigate solar.  We did this several years ago (on a different house in a far warmer climate) and the payback was terrible.  But we had some vague knowledge about new incentives that might change that story. We had heard that cost swere going down rapidly, too.  Maybe solar would make economic sense this time.

I contacted a reputable electrical contractor with a proven track record.  I was really impressed when instead of making an appointment to visit our house, he pulled us up on Google Earth and was able to calculate our roof dimensions to the foot as well as our angle of inclination.  Turns out our property is a good candidate for solar.  I asked for, and received within two hours, examples of two recent proposals.

The first glance seemed like great news.  A net cost we can write a check for,  a payback under four years, and a five year cash return of several thousand dollars.

But after a few minutes reality sunk in.  This seemed just  too good to be true.  Accountants need to develop a bit of intuition and my alarms were going off. 

Two hours later, and a couple of phone calls to my friends at PPL, I have a much better feel for these incentives.  And my students--as a management accounting specialist I work extensively with students on good assumptions and reasonable estimates-- have a new case to analyze this fall.  It's not that the contractor is unethical.  It's that incomplete information, and misunderstanding tax incentives, led to poor asumptions and unrealistic ROI estimates.

Tomorrow I'll attend a seminar on solar power.  I need to understand the type and size system that fits our needs best.  After that I'll be revising the proposal.  Stay tuned.   Maybe you should investigate solar, too.

This blog

Barbara McElroy is Associate Professor of Accounting and Head of the Department of Accounting and Information Systems at Susquehanna University in Selinsgrove, PA.  Before beginning a career in academe, Barbara worked in both public and private accounting settings, and owned several businesses.  She is particularly interested in the interaction of accounting and public policy.  Barbara will discuss current events with the interest of students, faculty, and practicing professionals in mind.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

46583

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

79392

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

51656

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

93624
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
23179

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

58924

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

84359

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

27156

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

67598

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

36707
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
106743
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
28522

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

55867
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
30498
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
34925

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

104979

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

36251

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

116174

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

64603

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

42084
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
69469

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

95774

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

56739