The prevailing thought as to why Romans used letters to represent numerical values instead of numbers involves the fingers on a person’s hand.
Once a number reaches higher than ten, it becomes much harder to count with your fingers. The Romans incorporated seven letters to represent different numbers for a standard counting method to simplify that situation.
The seven letters in Roman numerals are I, V, X, L, C, D, and M. These figures have values of 1, 5, 10, 50, 100, 500, and 1,000.
What Does M and MM Mean in Accounting?
The term “M” in accounting is the Roman numeral for 1,000. When two Ms are together (MM), it indicates 2,000 when using this methodology for expressing numbers. In modern accounting, MM is meant to represent one million. To avoid confusion, the term $1MM is often used to designate a million, while the generic “MM” represents 2,000.
Most abbreviations used for large cash sums today come from ancient Greek and Roman societies. We still use Roman numerals for some accounting methods, while large figures are designated by the Greek alphabetic equivalent of the specific term.
Here’s a quick look at some of the money terms you’ll see when referring to different sums from a Greek perspective.
- $50,000 becomes $50k, which is short for the Greek word “Kilo,” which means “1,000.”
- If you had $4 million, it would become $4M in Greek as the letter represents “Mega.”
- For $1 billion, it could be expressed as $1G, as the abbreviation is short for “Giga.”
The Greek option is typically capitalized when multiple abbreviations are used for accounting purposes. Roman abbreviations are usually not capitalized when using this method (1MM vs. 1mm), but each firm has different standards they follow.
This methodology differs from everyday slang, which takes the first letter from each word as the primary abbreviation.
If you had a commercial property valued at $92 million, a modern writer would likely abbreviate the expression by saying it was worth $92M. In accounting and financial analysis terms, we know that reads as 92 thousand dollars, but the context allows us to understand the expression’s intent.
The government might have a program that needs $50 billion in funding. Again, the modern writer might express this as $92B. That letter isn’t Greek or Roman, but the average reader would likely understand the concept. You’d look for a G or MMM in the world of financial analysis and accounting.
Writing style guides recommend that figures under a million should be written numerically (1,000 vs. one thousand). Once you get above that amount, you’d say billion or trillion instead of using the numbers.
Why Do Accountants Abbreviate Long Numbers?
We often encounter millions or billions in dollar terms in today’s world. The US government passes an annual budget that reaches trillions.
We’re even learning to think in more extensive monetary terms, such as quadrillion and quintillion. Can you imagine how much space would be necessary for that many $1 bills?
Once you get to a large sum, it makes sense to abbreviate it in common ways to help everyone understand the figure without overwhelming them.
Is it easier to read “one quintillion” or to write out 1,000,000,000,000,000,000? Would you prefer to call it a “billion billions” or a “million trillions?”
The same principle applies to millions and billions when dealing with financing and accounting terms. It makes more sense to say $2MM or $2mm than $2 million.
These abbreviations simplify the reading and comprehension of financial documents. If you have to spend time counting how many zeroes are after a number to understand the full amount, it’ll take extra time to understand what is being communicated to you by an accountant.
If you see “one quintillion,” you know that it’s a lot – and have spatial awareness of what it represents.
Do Accountants Use the Power of 10?
You won’t typically see the power of 10 rule applied to financial documents today. Most financial sums are tracked in ones, tens, hundreds, thousands, and ten thousands.
Wealthier individuals and households would reach to the millions. A select few would get to the billions.
Under the power of 10 rule, you represent the number of digits after the one. If you have 103, that means “thousands.”
If you’re Jeff Bezos or Elon Musk, you’d be talking in terms of 1011, which represents “hundred billion.”
Although these terms are useful for mathematics and some valuation charts, it creates comprehension difficulties because you have to figure out what the power represents by converting it into a cardinal number.
The cardinal number is automatically recognized when using M or MM in accounting. Even if you have a significant figure to represent, such as 12 billion, you could still write it as 1200MM, which would be understood.
These Rules Apply to Western Figure Representation
The Indian numeral system is slightly different from what Western countries use while incorporating Arabic numerals. Instead of “one hundred thousand,” there is a “lakh.” At “ten million,” the figure is a “crore.” Additional alterations include comma placements in large numbers after every two zeroes instead of three after the first thousand.
I first encountered the MM designation when I received a quote for surety rates. I worked independently as a contractor and needed a bond to establish a business profile. I was told my rate would be $2M per year to deliver $1MM in protection.
I remember looking at the agent and asking if that meant meters and millimeters. She looked at me with concern, then slowly said, “thousands and millions.”
We shared a laugh. I’m sure that encounter has been repeated in that office a few times!
Thankfully, that conversation let me understand a future one where I was given quotes for a single and an aggregate line of authority. They said it was $3MM and $12MM, respectively, so I knew they meant $3 million and $12 million.
Although different accountants have adopted Roman and Greek traditions (or transitioned to modern abbreviations), context is what unlocks the knowledge needed to understand the term.
