Bad Data Kills Great Finance Professionals
Your adrenaline is pumping and you’re up next to present your numbers to the senior management team. You’ve been working so hard to get to this point and you know there are no two chances with these senior executives. This is it. You put your presentation on the screen and after successfully having briefed them on the executive summary you put on this slide…
You’re about to proceed with explaining the details of the number but within three seconds of putting on the slide the Chief Commercial Officer points out a fatal error in your variance calculation of total revenue. You forgot to include “Other revenue” in the “Total revenue” variance! Despite it being a simple mistake you notice how most of the management team is more or less spaced out throughout the rest of your presentation. You blew it! It will take six months before you get another chance.
The simplest errors will kill you no matter how much of a genius you are
This was a very simple example but let’s be honest. It has happened to all of us. Oftentimes it’s something more complicated that gets to us i.e. the numbers we put on screen are not erroneous in themselves but the calculations behind them were and when you found out two months later and had to go back to management and tell them it was even more embarrassing than when you made the simple error in your presentation. Having good data and solid calculations are the backbone of every good finance professional. With each mistake you make you lose credibility and will need to make up for it and that typically takes a lot longer than it would’ve taken to prevent the mistake from happening in the first place. Your manager or your team might be able to overlook simple mistakes from time to time but you can be certain that senior management will not. No matter how great of a finance professional you are if you can’t get the basics of good data right your bad data will kill you.
It’s not just the mistake, it can have a serious business impact
If I look at my own company and some of the issues we sometimes face you can quickly see how having bad data as the basis for your decisions can create serious issues. One of the crucial numbers for Maersk Line is the unit cost or Cost/FFE (forty-foot equivalent container). The lower the unit cost the more competitive we are in our pricing or alternatively the more profit we make. So you’d think knowing this number well is crucial to our success. Now there are two variables in this measure. Costs and volumes (FFE). Like most companies, we know it’s not always easy to get the accuracy of our accruals to a level where you want them to be but at least you know you made them and the basis for them. Except for one time, we found out that despite our volume accruals had been made in the accounting system they never made into the reporting system and when we calculated the unit cost it showed that while cost had remained the same the unit cost went up significantly because the volumes were now missing. Now it looked like we had significant unit cost increases and decisions would be made to take out, even more costs when in fact our unit cost had gone down when you added back the missing volumes. Again bad data kills great finance professionals but if you’re not careful it can even kill great companies if you make wrong decisions based on it.
Are you now going to check your numbers one more time before your next presentation? Will you question if the system actually calculated the numbers correctly and how about giving your big financial Excel model an extra sanity check? The point is not that you should become a data quality fanatic because that can also lead you down the wrong path but more to make you aware of the serious consequences you will run into if your data quality is not up to a certain level. You need to find the right balance and there’s no one size fits all. As always let me know what you think by liking, commenting and sharing the article. There’s nothing that works better to get the discussion going!
This was the first instalment in my new series about how finance people can become more successful. I hope you will contribute with your tips as well so we can all help each other out.
For posts in my past series on how the CFO should transform Finance, you can continue reading below and further below there are more posts about finance business partnering.
I also encourage you to take a tour of my old posts on finance transformation and finance business partnering and not least “Introducing The Finance Transformation Nine Box” which is really that starting point for the transformation. Last but not least, you should join my Finance Business Partner Forum where we will continue to discuss this topic.
Anders Liu-Lindberg is the Senior Finance Business Partner for Maersk LineNorth Europe and is working with the transformation of Finance and business on a daily basis. I have participated in several transformation processes among others helping Maersk Drilling to go Beyond Budgeting and transformed a finance team from Bean-counters to Business Partners. I would love the chance to collaborate with you on your own transformation processes to help you stay out of disruption. If you are looking for more advice on how to get the most of LinkedIn I also have a few tips to share as well as if you want help in your job search. Don’t be shy! Let’s get in touch and start helping each other.