The Goal Is In-Sight
The June issue of Strategic Finance Magazine has an interesting article called, "Provide Insight or Face Extinction," by Noah P. Barsky and Anthony H. Catanach Jr. The main theory is the traditional accounting equation, and how it should be changed to provide information for decision making. For five centuries its focus has been on accumulating, processing and reporting the results of economic activity for many types of organizations. Recently, due to increased competition and advances in industry, it has been suggested that we reconsider the usefulness of this equation.
Managers have always recognized that in order to make good business decisions they need proficient information. Information however, can only be gathered by assessing collected data, and adding personal insight, if it is to assist the decision making process. Raw data is of little help to managers, so this thinking leads us to a new equation, which is more suited to today's competitive workplace: Data + Insight = Information If firms consider using this updated accounting equation they must understand that it is most effective when data processing technologies and creative thinking are used together. This supports the reasoning behind firms beginning to seek financial consultants rather than accountants because they can provide added insight to the data. Data that hasn't been evaluated has much less value to management because it can't be utilized as effectively in decision making. Computer software packages can now perform a broad range of traditional accounting functions making it easier for businesses to generate financial statements or leases using very little human involvement. Still, those programs can only produce data and are not able to create information because they cannot provide any insight. Insight requires value-adding human qualities to deliver analysis and interpretation and can't be found in any computer program. If they don't...
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