The solution for the disconnect might be as simple as “data visualization”.
Long gone are the days where we track the financial health of a business from cells on a spreadsheet.
Today, accounting relies as much on visualization as it does on its data. Service partners are expected to convert large quantities of data into easily communicable information that addresses the key performance indicators (KPI’s) and cash flow drivers of the business.
What is data visualization?
The concept itself is very simple. It is taking large quantities of data and converting it into an easily digestible format, oftentimes presented in the form of infographics or interactive charts.
Oftentimes, “less is more”, so you want to provide decision makers with relevant information to make wise decisions, without waterboarding them with numbers. Visual presentation can assist in giving the client a simple, yet detailed picture.
Data visualization and financial management
In the past, service partners and financial managers did not care about how data was received by the user. As long as it was complete, accurate, valid and reported in a timely manner, the job was done, and the boxes were ticked. There was no consideration for the persons viewing the data, whether they understand it or even have the ability to draw conclusions from the reports.
Now, with the development of “Big Data” in the technological environment and witnessing the influence it has on many aspects of the business world, especially the field of data visualization, we can see the benefits it has for financial reporting:
- Improved understanding: Humans can process images quicker than words; thus it requires less mental processing of information to understand large amounts of data very quickly.
- Quicker decision making: Keeping the decision maker’s focus during meetings is imperative, so by visually engaging them, decision makers can quickly comprehend what they are seeing. This naturally invokes strategic discussions, rather than question after question trying to better understand what is being presented. In turn, more meeting time is available for strategic discussions to make quicker and more efficient decisions.
- Putting data into context: By pairing accounting data with data from external sources, stronger and more rigid narratives can be formed to push strategic decision-making into a certain direction.
- Identifying patterns: Contextualised and visualised data not only creates narratives, but helps to identify patterns and anomalies, spot trends and give insights the business can use for budgeting and planning, structuring and decision making.
The data visualization process
Data visualization is a powerful tool that exists in several forms. However, visualization only works when it is done right. To do this, we have developed the following process to create custom visual financial reports:
- Understand the goal:
Establish the decision maker’s long-term vision, mission, and strategy to reach the company’s goals. The visualisation of the financial reports is built on the foundation of what the company wants to achieve.
- KPI’s and cash flow drivers:
Identify the company KPI’s and cash flow drivers – The decision maker’s strategic, financial, and operational achievements, compared to a budget or a set of pre-determined benchmarks. These are the real value-adding factors affecting decision-making and growth.
- Contextualised data:
Identify the external source data needed to pair with accounting data to expand, improve and solidify the validity of the financial reporting. For example, the incorporation of an external inventory management system data.
- Know your report consumer:
Not every report consumer is the same. Some have an extensive financial background, whereas others might need a bit of assistance when it comes to analysing financial information. Therefore, more knowledgeable decision makers will require more extensive and detailed data visualizations and others might only want a simple visual overview, from where in-depth discussions can follow.
- Invest in technology:
It is no secret that here at Wauko we love technology – with programs such as PowerBI we can generate visualised financial reports that are updated in real-time through automation. We can seamlessly integrate external sources of information into the reports and using automation, incorporate information with no manual intervention, thus ensuring the integrity, accuracy, and validity of the data.
Out with the old and in with the new
Remember, your financial reports should help you tell the right story for your decision maker. The visual aspects must not obstruct the crucial financial information your decision maker needs to keep building a strong business.
However, when done right, you are painting a picture for your decision maker that is aligned with their business vision and highlights the most important aspects to achieve their goals. Furthermore, you are making data easier to understand and process, resulting in more interesting, productive, and thought-provoking financial performance meetings in the future!