Business Reporting has always been one of the many soapboxes
While there is no doubt that sound business decisions are based primarily on the person making the decision, these decisions need to be based on sound information. Seat-of-the-pants decisions might work for small firms where the experience of the decision maker is the key element, but there is just too much information spread over too many decision makers for this practice to work in larger firms. In this case accurate and timely information must serve as the foundation upon which sound decisions can be based.
Why do you need this information?
Accounting and ERP systems can store and regurgitate just about anything you want. Actually it’s possible that for every transaction posted there can be 20, 30 or 40 fields that will allow you to slice and dice data any number of ways. The fact that you can carry reporting (intelligence?) to this level of detail doesn’t necessarily mean you should do it.
Start by asking yourself why you need the information. If it doesn’t lead to a decision, then you don’t need it.
In what format should this information be presented?
With the exception of audit trail reports, rows and columns are out. In no case can they lead to a decision.
Pie charts and bar chart are out as well. They, like row/column reports, are no more than a snapshot of a specific condition at a specific instant in time. People should never make snap decisions and that’s all this information can support.
Having said this, there is one use to which some specific data can be applied. Exception Management or Business Alerts are usually triggered by a specific value, but only if that condition falls outside an expected range. As an example, if a customer’s account exceeds its credit limit or a specific invoice becomes “x” days overdue, that condition should be brought to the attention of a named individual. Business Alerts handle the notification process while Exception Management gives users the ability to deal with an alert in a contact manager like application.
If rows and columns, bar charts and pie graphs are not acceptable, what’s left? Line charts are the only form of reporting that actually lets users develop a sense of the history and future of business conditions that can then give people the total picture. It really doesn’t matter where a company is today, nor does it matter where a company has been. All of that has already happened and cannot therefore be changed. What can be changed is the future and that’s where people need to concentrate their thoughts.
Think of a line chart as a beginning, a middle and an end. Historic values form the anchor upon which the line chart is constructed. The last current piece of data (the most recent value) is the jumping off point and the extension of the line formed gives us an idea as to where our future “might” be.
Once we see the total picture, we can determine if it’s heading in the right direction. Well, that’s part of the analysis, but not everything. The extended line chart gives us a hint of our future, but we still haven’t figured out if that’s where we want to be. You need a second line chart that acts as our target. Now we can see in an instant our past, one possible future and our target.
There are still two adjustments we might need to make. If the volatility of the data is significant, we may have to utilize some form of smoothing to make the data more understandable. Second, data does not follow a straight line path. Sometimes it’s increasing/decreasing over time. If that’s the case we may need to utilize some form of analysis that let’s us see these trends.
Now we can “see” the data and make a decision. If the trend seems to be within the acceptable range or budget we created, then no decision is required. If the trend seems to be heading in a negative direction, then we know we need to take action. No data analysis will ever tell us what to do, but this approach will help us determine if we need to do something and most importantly if the decisions we have taken seem to be having a positive affect.
What information needs to be extracted and displayed?
While it’s certainly easy to create graphs once the data values have been identified, the hard part is determining what you need to track. Remember, you can create any number of fields than can be used to feed your data analysis engine. Picking the right fields is the tricky part.
Think of an Income Statement. It’s got lots of data that could be graphed. Now think of virtually every accounting and ERP system’s ability to support drill down. If you can drill down from a data value to underlying information, then the information is of no use to you because it is being influenced by other data. Since you cannot track everything, you need to identify those basic factors that have the most influence on your business. Identify your Profit Drivers.
Maybe inventory turns in a distribution environment can be thought of as a Profit Driver. Don’t forget though that it’s not going to be possible to track every single item your carry. Maybe start with inventory turns as a whole, then by product line or possibly region. Where you start is not as important as your ability to quickly see where you may have a problem developing. Then you can drill down to a more detailed analysis.
Efective business decisions drive business profitability. These decisions need to be rooted in facts that can be brought to light instantaneously. People do not have the time to guess. They need to know where to place their attention. They also need to know whether the decisions they make are having the desired effect. If there is too much data, the issues may remain clouded. If there is no way to compare actual results against targets, how can you ever know if you are where you want to be or need to be. Finally, people need to identify those Profit Drivers that have the most significant impact on their organization or on their specific area of responsibility.
Forget about columns and rows. Forget about bar charts and pie charts. Adopt a proactive system that helps you track not just where you have been or where you are today, but where you could be tomorrow.