The numbers game
Business decisions rely on intuition and facts. Having all the facts at hand doesn’t mean that you feel comfortable making a critical decision. You need to understand how different choices change the likelihood of different outcomes. Then it’s up to you to decide which alternative is the most desirable one.
We see that traditional management accounting delivers financial information and analysis on a very detailed level and often isolated in silos. Numbers are forced to be split and allocated, usually to products and responsibility areas. This can give you a false picture of how profitability is generated. You focus on preciseness instead of relevance, and hence lose track of the real profitability drivers and the financial impact of a decision. Not understanding how the numbers game work can have a significant negative impact on your performance.
Managing and leading a company with clear responsibility areas is smart but measuring financial performance in silos will not optimize the consolidated performance. Identifying and measuring relevant end-to-end flows is key to drive profitability for the company on the whole. Incentives should reflect individual responsibilities but also be linked to these end-to-end flows.
Our methodology enables you to understand how the underlying reality and the numbers game in your company works. This will enable you to make decisions that have a real impact on your profitability and cash flow.