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Posted on Sep 3, 2012

Balloons, Physics and Finance

Balloons, Physics and Finance

by Tim Williams, SCSBC Director of Finance

I have two teenagers and they are great kids. It has, however, become clear at times that the slow development of the frontal cortex in the teenage brain means that the concept of “cause and effect” or “what goes up must come down,” is not at the front of their minds. As elementary school kids, we learn the concept of cause and effect by pushing a balloon on one side and watching the other side pop out. In high school my kids did physics and learned Newton’s laws of thermodynamics; the third law states that every action has an equal and opposite reaction. So why is it that my teenagers sometimes act like they have had a frontal lobotomy? Why is it that I also acted like this as a teenager?

My teenage daughter recently broke her jaw in a dune buggy accident when she didn’t put on her seat belt. She was thrown out of the vehicle and then it rolled on top of her. She was lucky not to be a quadriplegic. My son’s best friend experimented with the drug ecstasy at a party a few months back. Unfortunately the ecstasy was laced with some other chemicals and he died. He was a straight A student from a great family.

Experience is a powerful teacher.

In my role as Director of Finance, I have had the great honour of being able to go into a number of schools to do financial reviews. The sum total of all of those schools’ experience can provide both knowledge and wisdom to other schools in SCSBC. I thought I’d share some lessons I’ve learned. In many ways, the lessons are those of the balloon and physics applied to finances.

  • If your enrollment goes up and you don’t hire more teachers, then you may make a surplus, but your teachers may burn out.
  • If your enrollment goes down and you don’t reduce your teaching and administrative staff levels, then you will lose money, and lose the trust of your society members and bankers.
  • If the government grant pays 50% of the cost of educating kids and you don’t charge parents fees equivalent to the government grant, then you will need to suck the money from somewhere – lower teachers wages, higher debt, inability to replace buildings and equipment when they wear out, or a very generous donor.
  • If you fail to account for depreciation in your financial statements, then you won’t have the money set aside to replace assets when they wear out.
  • If you use a cash basis of accounting, rather than an accrual accounting method, your board may have a shock at the end of the year when vacation pay still needs to be paid to teachers.
  • If you don’t do a projection of cash inflows and cash outflows, then your banker may “flow” you out the door.
  • If you don’t set money aside for a rainy day (and you live in BC) then you better know where your umbrella is.
  • God is sovereign but man is responsible. The Lord will provide and we are His stewards.

It has been a privilege to work alongside my mentor and friend John Vegt this year. I look forward to serving SCSBC and your school in the days ahead.

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