by Ahmad Mukhtar Ludin - Computerized Accounting and Business Management teacher
All business decisions require information that is financial and non-financial in nature.Financial and non-financial information must be taken together as they help businesses assess a decision from different perspectives. However, all too often businesses become myopic and focus attention on only one form of information.
Financial information is any information that can easily be expressed in monetary values.Information such as total sales of a company, expense figures such as advertising costs or dollar values of assets such as land and building are some examples of financial information. Non-financial information, however, is not or cannot be readily expressed in dollar values. Non-information includes environmental effects, political situations and social responsibilities.
Financial information is usually the primary factor in a decision. A proposal that is not financially viable is usually denied allocation of resources. It is argued that businesses primarily exist to increase shareholders’ wealth and all other considerations that do not support this purpose should be ignored.
However, there are also times when a proposal that is not desirable financially should be accepted because it confers on businesses non-financial competitive advantages such as increase in employee or customer satisfaction, community building or reduction in environmental footprint.Negligence of non-financial aspects of a decision can negatively impact a business and this often results in financial consequences for businesses and thus an important consideration in business decisions.
Attention to financial information alone can create shortsightedness in companies. The focus on financial aspects may lead to higher profits or savings in short term, but will cost business in the long run. Non- financial information, on the other hand, usually helps businesses become successful over a long term. For instance, a business that cuts down spending on employee training saves money in short term, but this will negatively impact the motivation level of employee and quality of their work, as a result, the business will lag behind competitors and will see its sales and profitability decline in long run.
Financial information is easily available. The financial effects of a decision are often an easy task to determine, while non- financial implications of a decision are hard to determine. For example, the cost savings or losses arising from a factory closure can be readily quantified, but the impact on employees, the community or customers cannot be quantified
In conclusion, financial and non – financial information are both integral to decision making. While financial information is often easy to quantify and saves businesses in short term, non-financial information, though difficult to quantify helps business in the long run. Ignoring non- financial information exposes businesses to possible risks that often have serious financial consequences.
All business decisions require information that is financial and non-financial in nature.Financial and non-financial information must be taken together as they help businesses assess a decision from different perspectives. However, all too often businesses become myopic and focus attention on only one form of information.
Financial information is any information that can easily be expressed in monetary values.Information such as total sales of a company, expense figures such as advertising costs or dollar values of assets such as land and building are some examples of financial information. Non-financial information, however, is not or cannot be readily expressed in dollar values. Non-information includes environmental effects, political situations and social responsibilities.
Financial information is usually the primary factor in a decision. A proposal that is not financially viable is usually denied allocation of resources. It is argued that businesses primarily exist to increase shareholders’ wealth and all other considerations that do not support this purpose should be ignored.
However, there are also times when a proposal that is not desirable financially should be accepted because it confers on businesses non-financial competitive advantages such as increase in employee or customer satisfaction, community building or reduction in environmental footprint.Negligence of non-financial aspects of a decision can negatively impact a business and this often results in financial consequences for businesses and thus an important consideration in business decisions.
Attention to financial information alone can create shortsightedness in companies. The focus on financial aspects may lead to higher profits or savings in short term, but will cost business in the long run. Non- financial information, on the other hand, usually helps businesses become successful over a long term. For instance, a business that cuts down spending on employee training saves money in short term, but this will negatively impact the motivation level of employee and quality of their work, as a result, the business will lag behind competitors and will see its sales and profitability decline in long run.
Financial information is easily available. The financial effects of a decision are often an easy task to determine, while non- financial implications of a decision are hard to determine. For example, the cost savings or losses arising from a factory closure can be readily quantified, but the impact on employees, the community or customers cannot be quantified
In conclusion, financial and non – financial information are both integral to decision making. While financial information is often easy to quantify and saves businesses in short term, non-financial information, though difficult to quantify helps business in the long run. Ignoring non- financial information exposes businesses to possible risks that often have serious financial consequences.
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