Collecting Data PDF

In this module, you'll learn the importance of collecting data from a variety of sources and turning that data into useful information. You’ll also learn different methods for presenting information in a visual format to help aid understanding. Finally, you’ll learn how organisations communicate w...

In this module, you'll learn the importance of collecting data from a variety of sources and turning that data into useful information. You’ll also learn different methods for presenting information in a visual format to help aid understanding. Finally, you’ll learn how organisations communicate with different stakeholders in different ways. The terms for data, information, and knowledge aren’t interchangeable. It’s important to understand what each of them means as they all have very different meanings. Data are numbers, words or images in their raw form. Data in its raw form does not help with decision making. First it needs to be organised or analysed and turned into usable information. Information Once data is analysed by processing it, manipulating it and organising it into useful information, it can be used to answer specific questions. Knowledge Information needs to be interpreted, its relevance explained with context added, to clarify the insights it reveals. When information is used in this way it adds to the knowledge of the individuals or organisations using it. Data = 46, 54, 73 Information = Sales price for three products in a store. Knowledge = Which is the product with the highest sales price in the store? With this knowledge, decisions can be made based on the insight that the information has provided. Making good decisions is strongly driven by the quality of both the data and the information available to inform the decision-making process. If you have poor data, you’ll create poor information, and consequently the knowledge will not be based on the correct input. For example, if we know which products have the best margin then we can choose to target a marketing campaign towards these products. If we have poor data then we might spend money promoting products with lower margins. Accurate -Information needs to be sufficiently accurate that it can be relied upon and should have as few errors as possible. If estimates and assumptions have been used, these should be clearly stated. Complete - Information needs to be as complete as possible to be reliable. This doesn’t mean that information needs to be perfect, it means that key elements should not be missing. Cost effective- The cost of obtaining the information shouldn’t outweigh the benefits of having the information. User Driven- Different users have different information needs. Director level users typically prefer executive summaries that focus their attention on the key message. Operational users typically need more detailed information. Relevant - Information should be relevant to the question it’s trying to answer and shouldn’t include irrelevant information, no matter how interesting it might be, as this is a distraction. Accessible - Information should be easy to read and understand and tailored to its users. Visualisation of information can help improve its accessibility. Timely - Out of date information is useless. While backwards looking financial statements might be perfectly adequate to be produced on an annual basis, management information is needed far more regularly. Easy to use - The easier information is to understand, the easier it is to act upon. A spreadsheet with 10,000 lines may be complete and accurate, but the format might be overwhelming and prevent someone being able to use it. Strategic information is used by the people at the top level of an organisation and is used for long term decision making. Managerial information The next level is the information used by managers and is also known as tactical information. This information is used to help structure who is doing what, and in what timescales. The lowest level is operational information. Operational information is used to make short term day to day planning decisions. An example QQ Ltd has launched a new product line to its existing customers, and has created a new department to produce the product. Information should be tailored and based on the needs of the user. Strategic information The senior management may want information that tells them overall how profitable the new department is compared to the forecast that was in their plan Managerial Information The middle managers want more detailed information. They will want a breakdown of individual factors that are driving the overall profitability, such as the cost of sale of the product, and the cost of labour and overheads. Operational information The information used here may be something like staffing levels, and whether to allocate resource to this product or a different product. Whether to allow discounts on sales within permitted boundaries would be based on operational information. We’re now living in the information age and organisations understand that access to good quality information can provide a competitive advantage and help with decision making at all levels of the organisation. As we progress through the information age, more and more data is created every second of every day. The more data that exists, the more opportunities there are for organisations to turn that data into information. However, the more data that exists, the more difficult it can be to extract that information. Internal Data Data that an organisation generates, owns, and controls External Data Public data generated outside the organisation. Primary Data Data collected from first hand by the user for a specific purpose e.g. statistical data, interviews, financial statements, company social media posts. Secondary Data Data collected by others. It may be in the form of a summary e.g. newspaper articles, industry news. It may also be raw data collected by others and available to use or buy. Structured Data Data held in a pre-existing format that is easy to search. Unstructured Data Everything else, including: audio, video, social media posts, blogs. Big data If organisations can capture big data in formats that will help with their aims, then big data can add value in a way that data never has before. What is big data The term ‘big data’ means large, complex datasets especially from new sources. It comes from a number of sources; financial transactions, social media posts, traffic patterns are all examples of sources of big data. Big data has a number of characteristics. Volume The most important characteristic of big data is the sheer volume of it. The world population is over 7 billion people and it’s estimated that between them 2.3 trillion gigabytes of data are created each day. The volume of data in the world is increasing and traditional information management systems aren’t always capable of processing it. Velocity Velocity refers not only to how frequently the information that is being created and received needs to be processed, but also the speed with which the information needs to be used. Without the ability to process this data quickly, it can become obsolete almost as quickly as it’s created. Variety Traditional data is structured and focused on things that fit neatly into categories. For example, on a bank statement the data extracted would be the date, amount, and the description. This data is easy to fit into a database. Newer sources of data are unstructured – a picture, a voice note, a social media post. These are all forms of data but they are unstructured and harder to categorise. vERACITY With the huge volumes of data being available, the accuracy of the data becomes even more important. Knowing which data is needed to answer the question that needs to be solved becomes increasingly difficult as the external data sources need to be verified as accurate. Value Harnessing all the data available to an organisation means it has huge economic value if it can be correctly utilised. Organisations should review the data they are collecting to see if it’s of value. For example, data that is corrupt or has missing elements has little value as it cannot be used at all. Data analytics The sheer volume of data available means that the field of data analytics is becoming more prominent. Data analytics has always existed (professional accountants regularly analyse data), but what has changed is the processing power of technology to enhance the capabilities of data analysis. Valuable data Internally generated, primary data has historically been the most valuable as it’s reliable and easy to capture, whereas secondary, externally generated data was difficult to validate and use. By applying data analytics to big data, organisations can now take unstructured external data (both primary and secondary) and turn it into information that retains the attributes that make it good quality. Let's look at how to present information. Traditionally, professional accountants will prepare information in a text heavy manner, as numbers are presented, and words used to explain these numbers. This can be seen in the layout of a traditional set of financial statements. The information a professional accountant presents may be supplemented by the addition of visual graphs and charts that help the user understand the information being presented. This can be particularly useful when presenting complex financial information to stakeholders who don’t have financial experience. Images Including images when presenting information can help focus the attention on key points. For example, you could describe a circle by saying it is “a curved line with every point an equal distance from the centre” or you could show an image: Charts There are many different types of charts and they are used for various purposes. Pie charts are best used for representing parts of a whole, for example to demonstrate budget allocation whereas bar charts are useful for comparing different groups or displaying changes over time. Diagrams Organisations use diagrams for many purposes. For example, organograms, often called an organisational chart, display the hierarchy of the workforce. Auditors use process maps to track how processes and systems in an organisation work. Tables Tables are useful for presenting structured data that can be easily categorised. Matrices Matrices are useful for showing the relationship between sets of data. Graphs A graph is a type of chart that shows the relationship between two or more things. For example, a graph can be used to present trends over time, such as showing sales over a time period. Selecting the most appropriate method to display information helps the end user receive, use, and act on that information. Traditional data was easily displayed in graphs and charts. With the increase in the data available from a variety of sources (both structured and unstructured) it’s important to represent that data in formats that make it easy to understand. This might be as simple as thinking of different types of graph that can be used. If results are going to be presented electronically an organisation might want to take advantage of interactive tools that allow the user to engage physically with the findings (i.e. by clicking on a number to expand it). Infographics (which just means showing information as graphics) are an example of this. Many accounting software programmes now incorporate dashboards as a way of visually presenting information. They are designed to provide the user with information about the most important things they need to know as soon as they open the software. This is a great example of visualisation providing a summary of complex data in a way that helps the end user. You need to understand the type of information you are presenting, and who your end users are. Using one form of visualisation method can make it more difficult for the information to be communicated and received by the end user. QQ Ltd has launched a new product line to its existing customers, and has created a new department to produce the product. Communicating information within an organisation is done both formally and informally. Formal communication can take the form of formal meetings, memos, emails, reports, letters, verbal updates. Informal communication can take many forms and can even be informal conversations held between colleagues at the end of a formal meeting, or outside of working hours. Technology in the workplace has introduced real time messaging systems that are used for communication but it may not always be clear whether these are appropriate for formal use or not. The specific communication method used in any given situation will depend on the information that is to be communicated, and the timescale in which it needs to be disseminated. Disciplinary issues will usually be communicated very formally – by the use of meetings and letters. Changes to processes and procedures should be done using a range of methods. Verbal communication leaves room for instructions to be misunderstood, so the use of some type of documented communication method helps avoid misunderstandings, as does face to face or online training. A blend of informal and formal methods is usually appropriate for most internal communications, but the exact method will heavily depend upon the organisation’s internal culture. Communication with stakeholders A professional accountant’s most important skill is not always the ability to calculate transactions or know how to analyse them. The ability to translate what work has been done into information and knowledge that can be easily understood and acted on by a user is a key skill. Understanding that different stakeholders have different requirements is key to understanding what information they will need, and how it’s best to present it to them. Whether our stakeholders are internal (employees, and owners) or external (customers, suppliers, financial backers, government, professional bodies, the general public) ultimately, we provide them with information so that it adds to their knowledge and they can take action, or not, as a result. We want to present the findings in a way that engages users and helps them interpret large amounts of complex information. We provide information to stakeholders because we want them to have increased knowledge as a result of what we’re sharing. Anything that can be done to help communicate the key messages we want them to understand and act on is beneficial. You need to understand the needs of your stakeholders so you know how frequently to communicate with them, and what you should be communicating. There are benefits to also using informal communication methods including communicating information quickly. Communicating information to stakeholders is an activity that all organisations undertake on a constant basis. The steps to effective communication start with data. If the data isn’t good quality, then the information won’t be good quality. If the information isn’t good quality, stakeholders may not make decisions that are in the organisations’ best interests. In this module you’ve explored the difference between data and information and how important it is to: ensure your data is good quality and becomes good information ensure your information is communicated to the right people.