Enterprise 2

Activities of Finance Professionals

Introduction

• Finance professionals engage in several key activities:
  • Assembling information (reporting).
  • Analysis for insights (questioning).
  • Advising to influence (developing solutions).
  • Applying for impact (deploying solutions).
  • Applying acumen to assemble valuable information and inform subsequent proposals.

Assembling Information (Reporting)

• Data: Raw, unprocessed facts and figures, including numbers, letters, symbols, raw facts, events, and transactions, which are recorded but not yet suitable for decision-making.
• Types of Data:
  • Financial data: Standard metrics tracked and understood by the organization.
  • Enterprise data: Financial data plus broad operational and transactional data to bolster analysis and forecasting.
  • Big data: Emerging technology involving the collection and analysis of large data amounts to find trends, understand customer needs, and help organizations focus resources more effectively. It plays a role in information management, turning data into useful information.
    Class Activity: Examples of Data Types:
  • Big data: Social media activity, weblogs, sensor data, and machine-generated data.
  • Enterprise data: A retailer's customer database (customer names, addresses, purchase histories, loyalty program information), a manufacturer's inventory data (raw materials, work-in-progress, finished goods), an HR department's employee performance data (attendance, productivity, job satisfaction).
  • Financial data: Sales revenue, profit margins, balance sheets, income statements, and cash flow statements.

Data Collection

• Informal data collection: Happens continuously as employees learn about their surroundings through newspapers, websites, etc.
• Formal data collection: Occurs when an organization needs specific data for a particular purpose.

Sources of Data

• Internal Sources:
  • Accounting records.
  • Human resources.
  • Production data.
  • Sales and marketing data.
  • Timesheets.
• External Sources:
  • Libraries & information services.
  • Customers (product requirements & price elasticity).
  • Newspapers, journals & the internet.
  • Government agencies (e.g., Stats SA or SARS).

Data and Information Costs

Assembly of information includes:
* Purchase of technology.
* Equipment housing and testing.
* Operating costs.

Considerations:
* Cost should not exceed the value.
* Saleable intrinsic value.
* Potential to create a competitive advantage.
* Cost control and reduction.
* Informing corporate decision-making (e.g., marketing decisions).
* Strategy.

Information

• Information is processed data that is meaningful for planning and decision-making.

Information can be:
* Quantitative: Can be given a value (e.g., $100m$).
* Qualitative: Cannot be given a numerical value (e.g., color, subjective rating).

Class Activity: Quantitative vs. Qualitative Information:
* Quantitative Information:
* Financial statements: Balance sheets, income statements, and cash flow statements.
* Stock prices: Tracked over time.
* Interest rates: Measured and analyzed to determine financial strategy.
* Qualitative Information:
* Market sentiment: Influences stock prices and financial trends.
* Brand reputation: Affects long-term financial success and value.
* Customer satisfaction: Influences a company's financial performance.

Qualities of Information

• Accurate.
• Complete.
• Cost-effective.
• Understandable.
• Relevant.
• Accessible.
• Timely.
• Easy-to-use.

Technology's Role
* Technology captures data effectively and efficiently.
* Frees up time to concentrate on creating and preserving organizational value.

Data Cleansing, Connection & Data-Centric Business

• Data cleaning: Identifies inaccuracies or irrelevant data and modifies or deletes it.
  Methods:
  * Cross-checking raw data with validated data.
  * Manual checks and corrections.
  * Automated batch processing or scripting.
  * Data wrangling: Converting data from one form into another.
• Data connection: Connecting different data sources, recognizing that each piece of data is interrelated.
• Data-centric business: Stages of creating a data-centric business (from the 2013 CGMA report “From insight to impact – unlocking opportunities in big data”):
  • What data is relevant.
  • Assessment of existing data initiatives.
  • ID quick wins and proof of concept projects.
  • Conduct a formal data project.
  • Create and develop a data culture.

Analysis for Insights (Questioning)

• Data analysis: Evaluating data by comparison against benchmarks to form conclusions.
• Insights: Indicators of the drivers of value for the organization. Reinventing finance for a digital world” (Farrar 2019):
  • Reporting.
  • Analysis.
  • Monitoring.
  • Prediction.
    The role of insights:
    *Enables advice to be provided that can influence potential business solutions and subsequent impact business decisions.
    *Data analysis reports the facts.
    *Finance professionals explore the reasons why, what is happening now, and what might happen in the future.

Advising to Influence (Developing Solutions)

StakeHolders

Stakeholders are people or groups who have an interest or stake in the organization.
* Primary Stakeholders: Shareholders, Directors/Managers, Customers, Suppliers, Lenders.
* Secondary Stakeholders: Government, Community/Public, Environment.

Managing Stakeholders

• Mendelow’s Matrix: Stakeholder Mapping.

Applying the Matrix:
* A: Minimal effort: Give direction; open to influence and likely to follow instructions (Casual labour).
* B: Keep Informed: Educate; convince non-supporters of the strategy of appropriateness to ensure power is not increased (Small Suppliers & Core employees).
* C: Keep satisfied: Reassurance in advance, to avoid increased interest (Government & Customers).
* D: Key players: Communicate plans and discuss implementation (Key management, Key employees & Main Suppliers).

Communication Considerations

• Effective communication with stakeholders is based on 3 factors:
  1. Audience: Target for communication, varying information needs (e.g., close a unit of the business).
  2. Frequency: How often (daily detailed, monthly summary, etc.); use of tracking, analytics tools and apps to feed communication needs of stakeholders.
  3. Format: How and where should communication be delivered? One channel email? Blogs, SMS, formal reports, face time meetings, tele-video conferencing – skype, zoom etc.

Applying for Impact (Deploying Solutions)

• The 2013 CGMA report “From insight to impact – unlocking opportunities in big data” proposes a close partnership between:
  • The IT function: Primary data capturers.
  • Data scientists: Perform advanced data analysis.
  • Business leaders: Turn ideas and insights into concrete action.
• Through partnering with others across the organization, the finance function can:
  *Cascade the value creation focus to local-level planning, decision-making, and ongoing performance management in business units.
  *Help deploy major initiatives and solutions by engaging in change management, strategy implementation, and project management, in addition to ongoing risk management, process management, and performance management.

Business Partnering Skills

Leadership Support for Decision Implementation

Summary: Organizational Activities and Finance