You need to be signed in to add your comment.

Decision Making

5 months ago

Provide an example of when traditional accounting information was insufficient to support decision-making. 

Share on Facebook Share on Twitter Share on Linkedin Email this link
comment
Reply notification settings
Submitting your comment
Cancel
  • Admin Commented mmassoud 5 months ago
    Are many people mainly relying on traditional accounting metrics like net income, EBITA, revenue to make business decisions?
    Reply Do you agree? Agree 0 Disagree 0 Alert moderator Hide replies (3)
    Share on Facebook Share on Twitter Share on Linkedin Email this link
    • MGGuy 5 months ago
      I look at my financial statements every 2 or 3 days, focusing on the traditional cash flow statement, then the income statement, then the current assets, and I use this information to steer the company. I'm looking at cash flow, income, AR, and cash levels mainly. We use a few traditional ratios as well, but that's new. EBITA is never something we've looked at unless our bank wants it for a ratio. I do not see how anymore more than this would be useful, as far as our accounting department goes, but I'm open to suggestion.
      Reply Do you agree? Agree 1 Disagree 0 Alert moderator
      Share on Facebook Share on Twitter Share on Linkedin Email this link
    • acavaliertdy about 2 months ago
      Working in the NFP sector, as long as you're fulfilling your mission, you're not too far off budget and are still 'in the black', you're 'winning'. The caveat is, you have to keep one eye on the horizon and ensure that short term results are not the only ones you're focused on.
      Reply Do you agree? Agree 1 Disagree 0 Alert moderator
      Share on Facebook Share on Twitter Share on Linkedin Email this link
      • Admin Commented mmassoud about 1 month ago
        Great point. Balancing long-term and short-term goals is always a challenge and using the appropriate metrics to measure performance is key to ensuring a company’s sustainability. What type of metrics do people use at their organizations to measure long-term performance?
        Reply Do you agree? Agree 0 Disagree 0 Alert moderator
        Share on Facebook Share on Twitter Share on Linkedin Email this link
  • Obed_Maurice 5 months ago
    Example one:

    Traditional information is often outdated or inaccessible to support decisions. It was also costly to produce. The result was a outright lack of decisions.

    Example two:
    Determining which clients needed intervention was not possible until we started to measure their financial data engagement metrics.
    Reply Do you agree? Agree 0 Disagree 0 Alert moderator Hide replies (4)
    Share on Facebook Share on Twitter Share on Linkedin Email this link
    • Admin Commented mmassoud 5 months ago
      These are great examples. I’m interested on learning more, would you mind expanding on the types of financial data engagement metrics that you found useful.
      Reply Do you agree? Agree 0 Disagree 0 Alert moderator
      Share on Facebook Share on Twitter Share on Linkedin Email this link
      • Obed_Maurice 5 months ago
        We're looking at a few areas. We posted financial reports in the cloud and monitored who the users were and how often they looked at the report. This was incredibly enlightening. We learned that certain users were not accessing the data at all - despite paying us nicely. In other cases - users were very active.

        In another app - we provided users with a list of opportunities and ways they could improve their financial well being. This included a button in which they could ask for help or take action. We monitored how often they took action and engaged with their opportunities.

        The process is a bit raw but we're trying to get a better understanding of how people consume financial information and what prompts them to take action on their opportunities.
        Reply Do you agree? Agree 1 Disagree 0 Alert moderator
        Share on Facebook Share on Twitter Share on Linkedin Email this link
        • Admin Commented mmassoud 5 months ago
          That's a great idea and it shows that understanding how information is consumed can be a good first step to better create value for customers. How have other CPAs tried to better create value for their organizations and customers?
          Reply Do you agree? Agree 0 Disagree 0 Alert moderator
          Share on Facebook Share on Twitter Share on Linkedin Email this link
    • acavaliertdy about 2 months ago
      In my experience, people don't know what information is available and, when they do find something, don't spend any time cleaning it or analyzing it. They only find it useful if it proves their point and don't investigate if it doesn't.
      Reply Do you agree? Agree 1 Disagree 0 Alert moderator
      Share on Facebook Share on Twitter Share on Linkedin Email this link
  • David Chiang 3 months ago
    We’re living it right now. Historical data sometimes bears little correlation to the current business environment. Proving that decision making cannot be solely data driven. Ingenuity doesn’t come from the past when the past provides few clues. Sometimes decision making requires educated projections. Here’s another analogy: Even when you’re driving you should spend more time looking ahead than looking at the rear view mirror.
    Reply Do you agree? Agree 3 Disagree 0 Alert moderator Hide reply (1)
    Share on Facebook Share on Twitter Share on Linkedin Email this link
    • Admin Commented mmassoud 2 months ago
      Interesting analogy David, I couldn't agree more. How do you think CPAs could learn to "spend more time looking ahead" rather than looking at their "rear view mirror"?
      Reply Do you agree? Agree 0 Disagree 0 Alert moderator
      Share on Facebook Share on Twitter Share on Linkedin Email this link
  • MJD 4 months ago
    This conversation is on value creation. Having the right information helps an entity know if it is creating value. And then, if it is not, make decisions to change what it's doing. 1. I think that traditional financial statements are just one piece of the needed information. They are focused on the past. But they comprise audited information; so, assurance has added value to that information. And then that audited information provides a solid basis for other reporting beyond financial statements.
    Because of this role, I think that traditional financial statements always support sound decision-making, even if they are not all that is needed for decision-making. 2. Legislative auditors in the public sector have conducted value for money (VFM) audits for years. They look at whether programs are delivering value or not. They evaluate outcomes, not just outputs. And they don't just look at financial information. This type of auditing, which may also be done by internal audit, provides a basis for more informed decision-making. INformation about whether activities are creating value is always useful for decision-making. 3. We need to look at value creation beyond the numbers. ESG reporting or integrated reporting is helpful in this. Given the pandemic, we also need to look at value in the sense whether an entity contributes to the ability of a country to sustain itself and look after its own people. There is a real value in this. This is not suggested in the xenophobia sense; but rather in the sense of ensuring Canada is not vulnerable to or dependent on other countries when it comes to ensuring our well-being. Some things (food, energy, drugs, medical supplies, etc.) should be produced in Canada regardless of whether they can be produced cheaper elsewhere, because they are essential to the country. An article on April 2, 2020 in the Globe and Mail touches on this: https://www.theglobeandmail.com/business/commentary/article-five-lasting-implications-of-covid-19-for-canada-and-the-world/ .
    Reply Do you agree? Agree 1 Disagree 0 Alert moderator
    Share on Facebook Share on Twitter Share on Linkedin Email this link