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| David Cuykendall Click for Index Page |
One kind of financial information has a historical or results perspective. Its purpose is to record what has happened in the past. It is used by people outside of the organization — bankers, creditors, fiduciaries, regulators, and taxing authorities. A second kind of financial information has a right now time perspective; internal workers making day-to-day, real time decisions about the organization’s business processes. A third kind of information has a forward-looking predictive perspective. It is used for entrepreneurial and strategic purposes. This give rise to separate reporting modalities that vary by task environment.
The mistake often made with using the features of standard packaged financial management reporting software is to use a single model of inferences based on historical financial information to satisfy the information needs of the regulatory and financial users of fiduciary information (i.e., statutory accounting and reporting users) AND the users of operational and predictive financial information. It can’t be done within that single model.
The users of operational and predictive financial information need information at different and incompatible levels of aggregation and classification than the users of fiduciary financial information. The strategic decision maker needs predictive information while the operational decision maker needs real time, actual performance information. These two time perspectives of the requisite financial data are also incompatible within a single model.
Pull and push financial reporting
Pull reporting (usually composed of routine periodic checkpoint and highlight reporting) monitors and controls business as usual, defined as the way the enterprise normally achieves its objectives. Pull reporting comprises the a priori, formalized "seeing eye “of the enterprise.
In contrast, push reporting is non-routine financial management reporting. It relies on a posteriori knowledge premised on the principle that making sense of perceived events often occurs retrospectively.
A posteriori literally means “from what comes later” or “from what comes after.” This is a reference to experience and using a different kind of reasoning (i.e., inductive reasoning) to gain knowledge. This kind of knowledge is gained by first having an experience and then using logic and reflection to derive understanding from it.
A posteriori literally means “from what comes later” or “from what comes after.” This is a reference to experience and using a different kind of reasoning (i.e., inductive reasoning) to gain knowledge. This kind of knowledge is gained by first having an experience and then using logic and reflection to derive understanding from it.
It is the latent knowledge that is embedded in the enterprise’s human and technical theories and designs-in-use, uncovering and revealing the often unforeseeable consequences of the enterprise’s human and technical action logics.
It often involves soft value analysis (i.e., analysis that seeks to maximize the value of intangible outputs). This is the non-routine reporting that focuses primarily on monitoring and controlling the enterprise's portfolio of adaptive business initiatives, the hallmarks of which are high task variety and complex, difficult conversion processes.
It is a form of reconnaissance activity — a process of sense making that organizes ill-organized cues captured from the environment, as well as within the enterprise, translating these cues into sensible and salient information that can be understood and integrated within the enterprise's existing cognitive, knowledge, and identity structures.
It is a form of reconnaissance activity — a process of sense making that organizes ill-organized cues captured from the environment, as well as within the enterprise, translating these cues into sensible and salient information that can be understood and integrated within the enterprise's existing cognitive, knowledge, and identity structures.
The role of sensory modalities in financial management reporting
In the world of our senses, a sensory modality is one aspect of a stimulus, or what we perceive after a stimulus. For example, the temperature modality is registered after heat or cold stimulates the receptors that we experience as heat or cold. Familiar sensory modalities include light, sound, temperature, taste, pressure, and smell.
Analogously, the sensory modalities of financial management reporting involve the various types of knowledge bases from which reporting signals are generated, such as transactions stores or information culled from task environments recognized as meaningful patterns.
The "receptors" of these varying types of stimulus are usually either mathematical inference models in the case of transactions stores, or heuristic models in the case of task environment patterns.
These "receptors" are designed according to the specific purposes and tasks of reports.
The purposes and tasks of reports involve the activities of monitoring and controlling where controlling actions are invoked by reporting signals causing the initiation of specific action steps defined in a plan.
The "receptors" of these varying types of stimulus are usually either mathematical inference models in the case of transactions stores, or heuristic models in the case of task environment patterns.
These "receptors" are designed according to the specific purposes and tasks of reports.
The purposes and tasks of reports involve the activities of monitoring and controlling where controlling actions are invoked by reporting signals causing the initiation of specific action steps defined in a plan.
A properly designed financial management reporting system pairs reporting signals with the knowledge basis that generate them, separating knowledge bases on a non-overlapping basis by task, purpose, user, and audience — thereby establishing a clear-cut reporting order (i.e., the relative level of reporting functions in a hierarchy of reporting functions) in a rich way.
The weaknesses of conventional financial management systems' financial reporting capabilities
The reliance of conventional financial management systems on transaction knowledge bases restricts reporting capabilities to the relative appropriateness of the account codes uploaded to general ledger systems.
These codes compose the schema (i.e., the "cognitive map") of the enterprise's financial management knowledge base without recording its assumptions — preventing assessment of appropriateness for its intended tasks and purposes. Further, the rules that initially constructed it are violated over time by the pressures of ever changing reporting requirements.
Further, because designers attempt to build systems capable of performing highly diverse tasks for highly diverse purposes, conventional financial management systems are plagued by the problem of "combinatorial optimization." Conflated and overlapping knowledge bases result, frustrating the ability to pair reporting signals with knowledge bases by intended task and purpose.
This stifles attempts to organize report libraries by task and function — preventing the effective modeling of an enterprise piloting geometry while also conditioning enterprises into habitually processing ineffectively tailored reports.
In other words, financial reports are prevented from being tailored to the particular signal salience required for a highly defined task and purpose.
An effective piloting geometry requires that reporting signals be fit for their intended task and purpose. They must meet an agreed level of utility from the perspective of those charged with the responsibility of carrying out the actions they are intended in invoke — while warranting their accuracy and relevance.
These codes compose the schema (i.e., the "cognitive map") of the enterprise's financial management knowledge base without recording its assumptions — preventing assessment of appropriateness for its intended tasks and purposes. Further, the rules that initially constructed it are violated over time by the pressures of ever changing reporting requirements.
Further, because designers attempt to build systems capable of performing highly diverse tasks for highly diverse purposes, conventional financial management systems are plagued by the problem of "combinatorial optimization." Conflated and overlapping knowledge bases result, frustrating the ability to pair reporting signals with knowledge bases by intended task and purpose.
This stifles attempts to organize report libraries by task and function — preventing the effective modeling of an enterprise piloting geometry while also conditioning enterprises into habitually processing ineffectively tailored reports.
In other words, financial reports are prevented from being tailored to the particular signal salience required for a highly defined task and purpose.
An effective piloting geometry requires that reporting signals be fit for their intended task and purpose. They must meet an agreed level of utility from the perspective of those charged with the responsibility of carrying out the actions they are intended in invoke — while warranting their accuracy and relevance.
Definition of active and passive monitoring
- Active monitoring: Monitoring of a service or a process that uses automated regular checks to discover the current status.
- Passive monitoring: Monitoring of a service or a process that relies on an alert or notification to discover the current status.
Examples of active and passive monitoring reports
- Health check report. A health check is a quality tool that provides a snapshot of the status of an adaptive business portfolio item, a program, a line of business, or an operation.The purpose of a health check is to gain an objective assessment of how well the adaptive business portfolio item, a program, line of business, or operation is performing relative to its objectives and any relevant processes or standards.
- Checkpoint Report: A progress report of information gathered at a predetermined checkpoint.
- Highlight Report: Ordinary, periodic baseline financial, progress, and cost reports and their variants.
Definition of stimulated control activity
- Controlling activity: A control process, function or task that occurs over time, has recognizable results and is managed. It is usually defined as part of a control process or plan.
Examples of reporting controls that stimulate control activities
- Event-driven control: A control that takes place when a specific event occurs. This could be, for example, the end of a stage an adaptive business portfolio initiative, or the creation of an exception report. It could also include events such as the elapse of a deadline.
- Exception control: A situation where it can be forecast that there will be a deviation beyond the tolerance levels agreed stimulating a controlling activity. An exception report describes the exception situation, its impact, options, recommendation and impact of the recommendation.
- Tolerance control: The permissible deviation above and below a plan’s target for time and cost without escalating the deviation to the next level of management. There may also be tolerance levels for quality, scope, benefit and risk.
- Time-driven control: A control that is periodic in nature, to enable the next higher authority to monitor progress – e.g. a control that takes place every two weeks. These are time-driven progress reports such as checkpoint reports and highlight reports.
- Time tolerance control: The permissible deviation in a plan’s time that is allowed before the deviation needs to be escalated to the next level of management. Time tolerance is documented in the respective plan for an activity.
- Cost tolerance control: The permissible deviation in a plan’s cost that is allowed before the deviation needs to be escalated to the next level of management. Cost tolerance is documented in the respective plan for an activity.
- Alarm systems: These examples of reporting controls that stimulate control activities involve the design of the enterprise's alarm systems, and the following key questions: Are alarm systems functioning properly? Was the alarm system designed properly? Who notices when the system is not working properly?
