All in From the business world

The business finance conversation often revolves around accounting. Results are presented primarily in financial terms and standardized by accounting rules. Operational results (as opposed to legal) are primarily derived through accounting bookings with some further detailing or inclusion/exclusion of defined elements. And operational result measurement is intended to give the management a fact-based view on how the business is performing.

Now, let's take a step back and go through why accounting rules exist.

Say you want to achieve a certain output, like controlling your weight, for example. Then you would like to know what kind of actions and inputs are needed to get there. The output can be either a target, like losing 10 kg, could be controlling variability, like keeping your weight variation within certain boundaries, or maybe trying to understand where your weight will be given future changes in your environment. To make things easy, let's assume you want to lose 10 kg.

A company goes through some good times and some bad times. And sometimes it even has to march through the Death Valley (expression from Andy Grove). 

Cost cutting is something which usually comes up during the bad times and is seen as a necessary evil the company has to go through. It's a fuzzy term for a lot of different things generally perceived as a negative thing. So let's get to the bottom of it.

The 10 Commandments of Reporting

1. The why of reporting is forecasting

The reason why we do reporting is to gain insight from the past, learn from how the actual results have deviated from our expectations and adjust our views about the future. 

2.  Do not call reporting what is presentation of past data

Presenting past results without any insight into deviations from a reference or comparison to a benchmark does not trigger any discussion or learning. 

We tend to believe that the more we know, the more we will understand. We want more facts, more details, more numbers, more of whatever that would make us smarter. But what really makes us smarter is thinking and thinking is hard. Seeking data is easier than thinking, so we tend to go that way.

I used to be a big supporter of the idea that the more information I have at hand, the better I will understand how things come together. And so I dig in, get the data and figure out how that number became what it became. At this point I have already the first issue.