essay - GMAT: Argument 27

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 fs 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 . . . etc.

Answer:
The author, a member of a financial management and consulting firm, asserts that the firm should take a new strategy that the consultants of the firm advise the clients to check with the purchasing invoices to detect overpayment. As the reason, he cites that an employee of WIndfall, Ltd. states that the company saved approximately 10,000 dollars by checking just about 10 percent of the last month's purchasing invoices. The author also mentions that this strategy makes it possible that the firm acquires the account of Windfall as a result of showing the rigorous methods to Windfall. His reasoning is not quite wrong, but several considerations should be taken.

First, although he doesn't show the cost of detection performed by Windfall, the cost may be higher than expected. That is, say, if the detection had cost the company more than 10,000 dollars (this possibility is quite low though), the saving would have brought no value to the company. Therefore, he should have shown this kind of information necessary to judge whether the policy is reasonable or not.

Second, it is ignored that the effectiveness of this policy depends on the company applying it. I mean that the fact that Windfall could save 10,000 dollars doesn't necessarily mean that the other companies can save the same amount of money. For instance, Windfall has a serious ill-managed ordering process; the employees give the suppliers the vague information, thereby making the supplies provide wrong invoices. In this case, if a company may take in this policy, it cannot save the same amount of money, since the company already has a process to prevent overpayments.

In conclusion, although his idea seems reasonable, since the argument has uncertainty in terms of the reasons that I mentioned above, he fails to convince the readers to agree with his idea. To strengthen the argument, at the very least, he should mention the cause of the overpayment happened in Windfall.