My kid told me his score in an exam and the next question I asked was how about other children’s score. You see, the score is meaningless and doesn’t provide much information.
As an accountant, when we are doing analysis for a company’s monthly report, we always compare data and find the story of the data. We compare data from the following three aspects.
1.The company’s historical data
We assume company’s data is stable and any variation should have some reasons. What we do is to find the reason, tell the story for the reasons and share to stakeholders.
To find the reason, CFO needs to talk to the other departments, such as sales, marketing, operations etc.
We also compare the same periods of previous years, especially seasonable business. For example, Christmas season’s sale is usually high and we compare data to last two Christmas.
2. Compare other companies in the same industry
It is convenient to find list companies’ reports. By comparing to them, we know in which competition level we are in. The problem is different company has different business and we need to compare apple to apple. Then we find the list company’s sub-section and compare the same section’s data.
3. Compare the company’s own budget
It helps the managers to know how much they complete the budget. If sales are less than budget, managers will talk to sales person and if cost is over than budget, they will chat with operation manager.
All in all, only data without context is nothing. We must put data into a background and can tell the story from the data.