How to Solve Information Overload in Financial Reporting
I’ve heard it said that a single New York Times Sunday newspaper contains more text than the typical American read in their entire lifetime roughly one hundred years ago. Indeed, we are literally inundated with more information and data on a daily basis than we can possibly digest. So, how do we sort through all of this for relevancy?
Take Financial Reporting within your business, for instance. Is the information timely or woefully out of date by the time you receive it? Does the reporting highlight the true drivers of business performance or are the key elements lost in a myriad of other miscellaneous data? Are there valid and clear metrics (i.e.., budgets, operating plans, prior year actuals) for comparisons, and are they used within the organization to motivate improved performance? Are meaningful and specific financial “responsibility” reports available down to the lowest operating manager? And does each operating manager understand the financial levers and drivers within their control?
Exception reporting is just one way to reduce the information overload. There are, of course, many others. For example, reporting on activities is not useful, but reporting on outcomes can be. This next week, take on this challenge: With each financial report you see, assess its value to you; ask yourself how often you’ve taken actions based on this report in the past and what actions you should take now based on the information presented. Based on your answers, you might eliminate the report, modify the format, change the frequency, or mentally increase its importance to you as management tool.
Acrelic Group, Rapid Operating Improvements and Freeing Up Cash