Financial management principles and practices

Financial Management

Differentiating Between the Different Users of Financial Information

From the strategic to the tactical, the role of financial information in the enterprise affects dozens of roles and positions across every department of a company. The intent of this analysis is to define the different users of financial information throughout an organizations, what their needs are for information and the sources of the information they use. As uncertainty has continued to escalate on surrounding economic issues, the role of financial analysis and information has continued to escalate, which often happens during periods of severe economic swings and differences (Stroud, 1988).

Analysis of Different Users of Financial Information

The aggregation of financial information for use by senior management is the most visible use of financial information throughout an enterprise, and reflects the requirements of risk management, profitability analysis, sales reporting and supply chain management considerations. The senior management team of an enterprise requires a very broad, strategic view of all aspects of the value chain to better navigate the firm relative to risks and opportunities (Kivijarvi, Saarinen, 1995). Data used at this level of the organization is often derived from enterprise-wise accounting, customer relationship management (CRM), supply chain management (SCM), pricing and Service Lifecycle Management (SLM) systems (Stroud, 1988). All of these systems are used for generating a very accurate, precise view of the enterprise and how the many financial transactions completed lead to the overall development of dashboards and scorecards.

The next level of users of financial information is director-level managers and leaders of functional areas that coordinate each other's activities to ensure strategic plans are attained. The financial information these directors and managers require is often highly specific to their functional departments' goals and objectives. The director or senior manager of the operations and production departments will require variance analysis of costing, thorough analysis of supply chain costs and the cost of quality management and compliance management (Kivijarvi, Saarinen, 1995). These costs are critical to each of these directors ensuring a consistent level of conformance to their costing plans and contribution analysis of each department to corporate profitability. The origin of this data is from accounting and financial management systems that are used for tracking each transaction, aggregating the data into consolidated reports. Sales directors rely on the same level of aggregated data to ensure they understand how pipelines are progressing, including the development of new sales plans (Stroud, 1988).