Presenting data effectively
The previous series of my articles focused on preparing the data for planning, forecasting, and analytics. One of the goals was to reduce the time for data preparation in order to move to more value-added activities.
Let’s assume we have got the proper data and insight. Now is the time to make use of it and sell it to the business in order to improve the decision-making process, optimize operations, increase return on investment, etc.
I will not write about producing the insight as this is a very wide area and most of us know it from universities, extra studies (CIMA, ACCA, CFA, etc.) or gain on-the-job. Additionally many analysis is specific to the branch of business and can not be easily replicated.
What can be shared across the FP&A is the communication of the results of our work.
Some time ago Gartner published a report on the misuse of financial analysis. According to its study
1. Only 75% of decision-makers use financial analysis in decisions
2. From those who used financial analysis, only 54% selected the correct option
3. Only 39% used the whole analysis while 61% selected this insight they liked
Unfortunately, we as Finance could be at least partly blamed for such a situation. According to the study, about 50% of the misuse of financial data was due to the following reasons
- Quality of analysis (non-actionable, not right level of detail, comprehensiveness)
- Access to data
The other 50% is outside of the control of Finance (risk tolerance, decision-makers' experience) or could be at least partly managed by us (financial savviness of decision-maker).
How to address the issues mentioned above? Let's cover the quality of the data first.
1. The main reason why the decision makers do not use financial analysis in decisions was due to Finance presenting information with standard charts and tables that were not relevant or actionable. Therefore we need to identify key insights we want to tell business. So whatever we present we could use two brutal sentences (I am sure you hear them quite often) to check whether it is of any value to the business
· “So what?”
· “Show me my money!”
If our presentation (analysis, business case, etc.) does not meet these requirements, decision-makers are losing time looking at it.
2. Decision makers make wrong decisions as they do not understand the very complex and detailed presentations. We need to summarize the key findings so that viewers focus only on the most important facts.
3. Finally to make sure the users of financial information understand properly the numbers we should clearly communicate (narratives, tell a story, etc.) the findings of financial analysis. The flow of the presentation should be prepared in a logical way (cause and effect) that will be easy to memorise. Using a storytelling approach could add attractiveness and increase the effectiveness of the message.
Regarding access to data, we need to use contemporary technology that is much more user-friendly and allows access to information in real time. The use of self-service solutions and visualisation (e.g. PowerBI, Tableau) reduces the barrier to accessing data and increases comprehension in business. These tools could be further developed using AI and ML so that recommendations of actions to businesses are delivered in real-time e.g. via automated bots.
Finally, the financial savviness of decision-makers needs to be addressed. That could be done continuously and/or on special events (e.g. Finance for non-finance managers training).
Several years ago I trained about 50-60 managers in the company I worked for. The training was a 2-3 days board game, during which they managed the company, prepared the strategic plan, and budgets, executed these plans, and prepared P&L, BS and CF at the end of each year (the game was based on the 4-year scenario) and finally presented their 4-years achievements to the “Supervisory Board” (we were inviting CEOs, CFOs for this final presentation). After such training participants understood exactly what working capital is, why optimization of stock improves cash flow and return on investment, what is depreciation, etc. They knew how to ask questions and understood answers when interacting with finance. Teams consisted of employees from different departments (Production, Sales, Marketing, Procurement) so they had to face different perspectives on similar, real-life situations.
The overall understanding of how the business operates grew significantly and discussions during different business meetings were much more effective (e.g Sales and Operational Planning process took much less time and results were much better).
Maybe such extensive training is not needed in each organization but every interaction with business (presentation of analysis) should be part of the on-the-job education. While we, as Finance need to learn the business and understand strategy, business models and operations, people from operations need to understand the financial effects of their decisions.