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Why non-financial data are useful for Finance?


Lino Cinquini, Professor of Management, explains why CFOs today should use non-financial data for defining the business model and set their strategy.

Transcript


In these last decades non-financial information has become more and more important for businessI would say that there are two main aspects, two sides of the coin, from one side there is the basic fact that the financial performance is driven by operations and factual things and in this sense non-financial information can be considered the value drivers of financial final result.In this respect non-financial information are the so called "lead indicators"while financial information are the "lag indicators".

Before we have the performancebased on non-financial information and then we produce financial results.For instance the quality you provide to the customer, the time you react to the market, the time to deliveryour service or product, the way in which you manage your operation and then you monitor it in several ways.All these are the facts that produce finally financial results.

So managing the value drivers has became in the past decades one of the most important issues for competitive business and in this respect there has beena development also in management control systems to integrate non-financial information with traditional financial items.The other side of the coin is related to business reporting.

Also in business reporting to stakeholders and shareholdersnon-financial information is becoming more and more important in order to understand the business model and the strategy of the business.

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