Financial Data - When Less is More - Sept 2016
Sheridan Maine have recently been involved in a report covering the changing role of the financial director, and it got us thinking. From basic reporting duties through to a multi-faceted consultative approach, accountancy professionals are expected to become a lot more involved in the decision making process of the business, but what is more important; the amount of data available, or how it is presented when it comes to making those all-important decisions?
The ever-increasing realisation that an influx in financial data doesn’t lead to better decision making is upon us, yet from time to time, business leaders toy with the idea that that little extra information from these accountancy professionals will have led to a better decision being made.
Research by CEB Global has revealed that “the misuse of financial planning and analysis (FP&A) by managers can cost companies as much as 1% of revenue for big strategic decisions” as opposed to lack of information. It is thought that ‘lack of information’ is commonly used as reasoning in hindsight as a manager recognises what was missed and why the right choice was not made.
Further research uncovered that FP&A managers felt their teams tended to be “data rich and information poor” and only offer partial views of a problem, failing to present trade-offs and alternatives to business leaders, but they were encouraged to present the full picture and form specific conclusions based on their vast amounts of data.
On all counts, it appears that often the issue that impacts upon decision making is not the quantity of data, but how it is presented and explained to the business leaders. In this case, more is undoubtedly less.
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