2.1 Finance activities from information to impact & How finance connects the activities Flashcards
The basic finance activities of finance professionals can be summarised using the:
- Information to impact framework (pg 30)
The framework has four sequential stages to value creation and preservation:
- Information
- Insight
- Influence
- Impact
The framework has five linking activities (5 A’s)
- Assembling information (Broad role: Reporting)
- Analysing for insight (Broad role: Questioning)
- Advising to influence (Broad role: Developing solutions)
- Applying for impact (aka execute) (Broad role: Deploying solutions)
- Acumen
Assembling information:
- Collate data to prepare information about the org
- Data is from a range of internal and external sources
- Data is defined as facts or figures in a raw, unprocessed form
- To be useful to the org this data must be turned into information
- Information is data that has been processed to provide meaning and use to the person receiving it.
Assembling information involves (turning data to information):
- cleaning the data ie. identifying incomplete, inaccurate or irrelevant data and replacing, modifying or deleting it.
- connecting different data sources
Examples of assembled information:
- management information in an accessible format for managers
- accounts and returns prepared according to prescribed format for external reporting
Analysing for insights:
- Provide insight to users by analysing information
- Both financial info (sales) and non-financial info (customer satisfaction) is analysed to determine patterns and relevant insights for users of info.
- Eg: comparison of info to budgeted or historical figures
Advising to influence:
- Communicate insight to influence users
- Finance professionals then:
- communicate these insights and
- contribute an objective and responsible perspective to influence the org decision making
Applying for impact (aka execute):
- support the implementation of decisions to achieve the desired impact
- finance professionals apply this information to create value for the org through their impact on:
- strategic plans
- budgeting and resource allocation
- performance measures
- performance reviews
Acumen:
- Is not one of the stages but rather connects the different activities to each other and covers the entire framework
- Acumen is the ability to use practical skills and the depth of perception / discernment to make good judgements and accurate, quick and effective decisions.
- Finance professionals prepare valuable info (reports & analysis) on the outcomes achieved from different initiatives (investment in new technology) to help inform decision making and future proposals.
The information to impact framework can be expanded:
Moving from left to right there is a shift in emphasis between:
- accounting and governance (eg: financial reporting and management accounting, regulatory compliance, risk management and corporate governance)
- guidance and management (eg: helping the org to forecast and analyse trends to achieve profitable growth goals)
The FF works with and along side the:
- other functions of the org and helps to connect the different activities that they perform
The relationship between FF and other functions:
- It provides info and insight to other functions which enables them to create and preserve value (eg: can use resource allocation to enable org to achieve objectives)
- It works with the other functions to shape how the function creates and preserves value (eg: can use performance management to assist org to achieve objectives)
- It works with the function to achieve the desired org impact for the function, narrating how the function creates and preserves value
The FF will communicate (narrate) insight to:
influence stakeholders, getting value from financial and non-financial data in order to help the org (focus on what needs to be done in future to create and preserve value):
- make better future decisions
- enhance future operational efficiency
- better understand it’s customers
