Management information has become more critical to corporate decision-makers, but when it comes to non-financial information, the analysis is rarely robust enough. Finance departments need to become clearing houses for all management information, not just financial data, if they are to play their crucial roles in supporting strategy planning and decision-making. And the evidence shows that the most robust information — information that results in big rewards for companies — comes from finance departments.
It also shows that high-performing companies produce information that incorporates external market and predictive analysis. This is where finance departments must step up and step in. They need to talk to the business about producing management information to understand fully how non-financial indicators in their reporting packs address business needs, interact with other metrics and inform and support the strategy. Many companies already produce such information but often it is done separately from their finance departments, resulting in no real benefit or yield.
In fact, in a recent survey by PricewaterhouseCoopers CFO Europe Research Services, 57% of respondents rated their non-financial indicators as poor to adequate, especially when it came to timeliness. This can be traced to finance departments dealing only with financial information while non-financial information is being chaotically scattered across multiple business units.
This is the closed loop of a vicious circle: poor reporting causes companies to underperform as their decision-making process is less responsive to reported trends, meaning managers are less likely to trust the reported data in the first place.
Typically this aligns with the tools used, with underperforming companies using spreadsheets as the primary tool for management reporting and top-performing companies employing solutions such as data-warehousing and specialist packages. This comes back to how well informed the strategies are.
Are companies aligning their management information to their strategies? Roundly they are through KPIs, but not enough with external market information and predictive analysis. Partly this is due to high-quality information being irrelevant to the strategy. The scattered reporting function leads to information that largely is pointless or ill timed and this is why finance departments hold the solution.
CFOs and their departments have an ability to turn information into insight. They can fairly weight the importance of financial and non-financial information to the business. The correlation between top–performing companies and the accuracy, timeliness and relevance of their management information is clear.
Management reporting needs to incorporate external market information and includes predictive analysis. It should include the business in giving more meaning and context to non-financial information. The reporting function must be aligned with a company’s strategy.
In the modern business world, management and board reporting is vital when it comes to making strategic decisions, but at first glance it can seem like a paradoxical situation. High-quality data is required to drive decision-making but unless it is aligned to the business’s strategy, it can seem worthless. The solution to this problem can be found in your finance department.
It is clear that CFOs and finance departments need their management information to be dynamic, relevant, timely and aligned to the organisation’s goals and strategies. But how is the strategy defined without this information?
A sound strategy that contributes to your company’s long-term success is one steeped in reality. The entire organisation needs to come on board. All parties need to know how they contribute to the bigger picture.
This information needs to come from finance departments, which need to play a more integral role in the strategic planning and decision-making process, particularly at the implementation stage.
