Chapter 10 - Communicating Information To Stakeholders Flashcards
The attributes of good quality information
The attributes of good quality information are often remembered using the acronym accurate
Accurate - Decision making relies on accurate information
Complete - Information that is provided to managers and decision makers must be complete, meaning they should be provided with sufficient information for their purposes
Cost effective - The usefulness and value of information must be greater than the cost of producing it
Understandable - The style, format, detail, complexity of information should fit the users needs
Relevant - information should be communicated to the right person
Authoritative - Information should come from a reliable source
Timely - information should be communicated in sufficient time for the user to make the necessary decisions.
Easy to use - Information provided should be easy to use
Information at strategic/ corporate level
The management at this level will be concerned with planning the future direction of the business and setting goals.
This will require internally generated information about the performance of the business and internal factors that may affect the way the business performs in the future. However it is likely to focus more heavily on external information that affects the business, such as competitor activities.
The information provided at the strategic level of an organisation will be summarised rather than detailed. Senior management will want to know the headline figures and will rely on lower levels of management to carry out the analysis before it is presented to them.
Information at managerial level
This level of an organisation will be responsible for making decisions about how the organ will be responsible for making decisions about how the organisation will achieve its strategic goals.
Information required at this level will be mostly generated internally, for example analysis of sales. Some external information may be required at this level of the business, for example competitors pricing.
Information at operational level
At the operational level, the management are involved in the day to day running of the business.
Operational management will be given detailed information, and will be expected to implement strategic and tactical decisions that have been made at the higher levels of the organisation.
Detailed information from internal sources will be used to make immediate decisions. This information tends to relate to past events.
Big data
The term big data can be defined as a collection of data which is so large and complex that it is difficult to store and process using traditional data processing software.
Sources of internal and external big data
Social data - data from social media which provides an insight into the ways customers behave. This can help businesses to focus their marketing to appeal to their target markets.
Machine data - checkout scanners in supermarkets that records what customers have purchased. This data is machine generated so it will be well structured and easier to analyse.
Transactional data - generated from the daily transactions that take place in a business. It was included in huge amounts of data about every individual transaction including information about customers, suppliers, products, prices, locations and importantly the links between each of these.
Characteristics of big data
Volume - how much data there is.
Velocity - the speed in which the data can processed.
Variety - the variety of the data. This is important to businesses that sell in a mass market as they will need to be aware of changes in consumer tastes.
Veracity - how accurate the data is. It is important for data to not have bias, duplication or inconsistencies.
Value - how useful the data is to the business.
Dashboards
One of the roles of the finance function is to present information clearly and simply so that it can be understood by non financial managers. Dashboards are in a computerised accounting system and consists of graphs, charts, diagrams and tables.
Benefits:
Data is easy to understand and for smaller businesses this will provide detail for owners or managers to control the business if they do not have a financial background
Most dashboards can be customised so that the information is relevant to the business and users
The dashboard can be produced in real time, so it will always be up to date
If the business uses cloud based accounting software, the dashboard can be accessed from any device and location with internet access
Information at different levels of an organisation
There are typically three levels of management within an organisation:
Corporate/strategic
Managerial
Operational
Benefits of using big data
Attracting and retaining customers - it identifies patterns in consumer behaviour and use these patterns to promote brand loyalty and offer Similar items based on previous purchases by consumers.
Focused marketing - rather than spending money on advertising that may not work, businesses can use big data to analyse trends in the market and focus their marketing.
Gain competitive advantage - managing big data effectively will allow businesses to gain an advantage over businesses due to improved decision making.
Identification of areas of potential risk - effective analysis of big data will allow businesses to identify riskier areas in the business.
Faster innovation - the speed in which big data can be collected and analysed means that businesses can react more quickly to changes in the market
Limitations of using big data
Lack of knowledge and skills - to manage big data businesses need to employ skilled data professionals. This means that the Issues that can arise from this are insufficient skilled professionals to take on the roles and a lack of on going training.
Difficulties integrating data from different sources - this can overwhelm data analysis tools and result in information being inaccurate.
Data Security - businesses must ensure that they have sufficient resources to protect the big data they collect against the risks of data leaks, hacking or data losses.
Professional scepticism in relation to big data
Professional scepticism must be applied before big data is used as the basis of key business decisions.
Data analytics from external sources
Smaller businesses may not be economically viable to get access to high levels of resources and skills/expertise to interpret big data. These businesses will use professional data analytics companies with specialist skills to provide analysis.
Using external sources for data analytics will reduce the costs for the business however the professional analytics company may not have the specialist knowledge of the sector in which the business operates.
Visualising information
Data visualising is the term given to images, diagrams, graphs, tables, matrices and charts that are used to present information in an accessible and usable way.
Tables
Presenting data in a table is one of the simplest ways of making information clear and easy to understand. Tables will normally arrange data in rows and columns.
Advantages of using tables to present information:
Clear presentation - large amounts of information can be summarised and presented clearly
Easy to compare figures
Patterns can be indentified
Easy to indentify anomalies
Easy to prepare and understand
Disadvantages:
Too much data - some tables may include so much information that the user is overwhelmed, meaning they will be unable to process what the table is showing.
Data may get lost - if the table is large, this could mean key points cannot be easily identified
Two dimensional - if further analysis is required, further tables will need to be prepared
