2.2 Sources of data & Types of information Flashcards
Internal sources of data:
come from a variety of areas such as:
- accounting records including
* sales ledger data (volume and value of sales by customer or product)
* purchase ledger data ( value of purchases for each supplier) and
* fixed asset data (date of purchase, cost, location, depreciation method and rate)
- payroll data (number of employees and hours worked, wages paid and tax deducted)
- production data (number of produced & rejected units)
- sales and marketing data (market research results / customer feedback)
External sources of data:
- suppliers (product prices & specifications)
- customers (product requirement & price sensitivity)
- internet and other technology, newspapers, journals (share price, data on competitors, technological developments, discussion groups)
- government (industry & demographic statistics, taxation & inflation rates, forecasts for economic growth)
External data sources may be limited in their usefulness due to:
- It may not be accurate
- It may be out of date
- The source of published data may not be reputable
- It may not meet the exact needs of the bus.
- It may be difficult to gather
The organisation needs good info for:
- Planning and decision making
- To manage and control the org effectively today and in the future
Characteristics of good management reports:
ACCURATE
- Accurate
- Complete
- Cost < Benefit (ie. cost effective)
- Understandable
- Relevant
- Adaptable / Accessible
- Timely
- Easy to use
Accurate reports:
- Figures should add up and no typographical errors
Complete reports:
- Reports should include all necessary info by the users of report and should be aligned with overall objective of report or org.
Cost effective reports:
- The benefit of having the info must be greater than the cost of producing it.
Understandable reports:
- Users of the report should be able to understand it’s contents and use the contents to fulfill their needs
- Presentation should be clear and in line with best practice
Relevant reports:
- Unnecessary info must be omitted
- Information overload can detract from usefulness of report
- This problem can be overcome by using
- drill down reports (provide users with option to look at increasingly detailed info about a particular item)
- exception reports (only triggered when a situation is unusual or requires management action)
Adaptable / Accessible reports:
- The output reports should be able to be adapted to meet needs of user or org.
- Reports must be accessible through the appropriate channel of communication (verbally, via reports, via email etc) and is reported to relevant persons
Timely reports:
- The info should be provided when needed and not too frequently
- Otherwise could lead to info overload and cost exceeding benefit
Easy to use reports:
- Info should be presented in form that meets industry or org best practices.
- It should not be too long and should be sent using the most appropriate channel
Technology will play a key role in:
- capturing info and displaying it.
- automation can now do the job more effectively and efficiently
- automation of repetitive tasks will free up the finance professionals time to concentrate on creating and preserving value for the org.
Visualization involves:
- using technology to turn raw data into useful info for the org.
- traditional spreadsheets are turned into pictures and infographics which is easier for the lay person outside of FF to understand.
Types of information:
- Financial
- Non-financial
- Quantitative
- Qualitative
Quantitative info:
- is info that can normally be expressed in numerical terms
Common mistakes made when analysing quantitative info for insight:
- Presentation of info - choice of graph or chart if inappropriate (may indicate dramatic changes due to scale chosen)
- Failure to evaluate the figures using a suitable comparator or benchmark (reporting 20% increase in sales without comparing to industry increase of 30%)
- Collection of data - org often use samples of data to produce statistics. However it is difficult to collect a random sample and big enough to represent entire population which will result in poor info being produced and analysed. (Good quality analysis relies on a representative sample of population)
Qualitative info:
- is info that cannot normally be expressed in numerical terms
- Often in the form of opinions which is subjective in nature which may be a problem
- Difficult to record and process but still needs to be considered when making decisions
- Opinions must be collected and transformed into meaningful info and often into quantitative info
Examples of qualitative info:
- Employees - who will be affected by certain decisions which may threaten their continued employment
- Customers - will be interested in new products but would want to be assured that service arrangements for existing products will continue
- Suppliers - will want to be aware of org plans for example a move to a just-in-time system
One way to reduce the effect of subjectivity is to:
- Look at trends in info since the biases will be present in each individual time period but the trend will show relative changes.
Qualitative factors that should be considered before making a decision:
- The effects on the environment - certain decisions may affect emissions / pollution which could affect the org public image
- Legal effects - there may be a legal implication for a course of action or a decision may be needed due to a change in law
- Political effects - government polices (eg: taxation) may affect decisions
- Timing of decision: timing of a new product launch may be crucial to it’s success.
