Qualified Information Exchange

21st Century Business Reporting

Remco van Wijk
Sebastiaan Bal
Niels de Winne

Qualified Information Exchange

21st Century Business Reporting

Big Bites Publishers

This epub is based on the 1st edition published in the Netherlands in 2016 by

Big Bites Publishers
P.O. Box 82408
2508 EK The Hague
The Netherlands

www.bigbites.nl
www.qualifiedinformationexchange.com

Authors: R. van Wijk, S. Bal, C.P.I. de Winne
Editor: J.P. van der Woerd
Graphic design: WIM Ontwerpers
Cover photograph: A.M. van der Linde

ISBN/EAN 978-90-825851-1-7

Copyright © Van Wijk / Bal / De Winne | Big Bites Publishers 2016

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the publisher or one of the authors. Whilst the authors, editors and publisher have tried to ensure the accuracy of this publication, the publisher, authors and editors cannot accept responsibility for any errors, omissions, misstatements, or mistakes and accept no responsibility for the use of the information presented in this work.

Acknowledgements

Over the past years, the three of us have shaped our thoughts on qualified information exchange in the context of the Dutch public-private standard business reporting (SBR) program. The inspiring co-operation with congenial civil servants, software vendors, auditors, fiscal service providers and other fellow professionals has given us the drive, besides our daily work, to try to formulate these thoughts in a level-headed description, accessible to all who face the challenges of business reporting.

We would like to thank our colleagues at Thauris—especially Joris Tinbergen, Mark Knijnenburg, Charlotte Franenberg, Vincent de Haan, Ralf van Oosterhout, Erwin Rigter and Nitesh Bharosa—for their valuable review comments. Finally, we thank Paul van der Woerd for his contribution as an editor.

It goes without saying that we as authors are responsible for any errors.

The Hague, August 2016

Contents

Preface

I How Are We Doing?

II The Business of Reporting

Preparing business reports

Submitting and accepting business reports

Processing business reports

Facing the trouble

III The Trouble of Setting up Reporting Chains

Implementing reporting chains

Designing reporting chains

Common failures in specifications

Facing the challenge

IV An Integrated Approach

V Three Archetypical Reporting Chains

1 Hospital: Checking public expenditure

2 Farm: Gauging sector outlook

3 Factory: Monitoring subsidiary performance

VI Setting up Reporting Chains

1 The design step

2 Holistic design

3 What to model

4 Modelled archetypes

5 Pivotal specifications

6 The implementation step

VII Operating Reporting Chains

1 The prepare step

2 The submit and accept step

3 The process step

VIII Dealing with Multiple Chains

IX To the Next Level of Excellence: Business Reporting as a Service

X Where to Start

Recapitulation

PREFACE

Qualified Information Exchange: The Pending Revolution

Did you ever wonder how it is that you can order the freshest, most exotic food just around the corner any time you want, while your government must base next year’s policies on last year’s statistics? Or did you ever attend an annual results presentation and observe how internal figures, awaited for months, were discussed over flowers cut the other day a continent away?

Physical products are shipped across the planet quickly, reliably and of high quality all the time. When it comes to information, we accept being palmed off with dubious if not inferior, old if not obsolete stuff. Why is that?

The answer is that we missed a revolution.

Historically, jumps in the scale and quality of manufacture and exchange have always been complemented by similar revolutions in the way we share information to give account. This is what we observe in 3000 BC Mesopotamia. Urbanization demanded formal registering of stocks and debts, and thus gave rise to the creation of cuneiform and the use of tokens; and this is what we observe when we fast forward to the dawn of the European Renaissance. Bankers began to play crucial roles in administering a trade that came to span the whole world. By the time this had become common practice, in 1494, Luca Pacioli published his Summa de arithmetica, geometrica, proportioni et proportionalita, a book still considered the foundation of our current double-entry bookkeeping system.

Fast forward again, to the 1980s. A new discipline, supply chain management, drastically reformed production and distribution. Concepts such as ‘lean’ and ‘just-in-time’ boosted almost every sector, including information and communication technology. Accounting, by contrast, has retained the form it basically found five centuries earlier. To this day it is based on the general ledger, checked every now and then against loose paper receipts, and validated by auditors’ wet signatures.

This is odd, and not only for the lack of historical parallels.

It is odd, because we feel that our reporting chains fail to do what they must do every day. Inquiring parties don’t get the data they need, or only too late. Audit assurances don’t give us the certainties we demand from them. Billion-dollar budget hospitals lose track of their departments’ expenses. For EU member states, unpleasant surprises in the form of post-clearance recoveries are routine. These are disappointing results in view of the capital and resources organizations of all sizes waste on the most basic forms of reporting.

It is odd, because we do have technical alternatives. We have the means to register states of affairs in multi-faceted ways and to use real-time data. We can apply electronic authorization and other protocols for secure information exchange among organizations.

And it is odd, because the very principles of supply chain management that have worked so well in production and distribution constitute the preconditions for an analogous revolution in our reporting chains.

This book wants to unleash this revolution. With both technology and theory in place, the question is not whether we will have such a thing as ‘information supply chain management,’ or, as it is to be called in this book, qualified information exchange (QIE)—a discipline to ensure that our hunger for figures is satisfied as efficiently and effectively as our hunger for products. The question is why we would want to wait for it any longer.

This book describes the possibilities and starting points we have that enable us to bring our reporting to a level appropriate for our globalizing economies and societies. Based on good practice and a range of experience, it outlines, for decision-makers and managers responsible for collecting reporting and accounting information, the essentials of QIE.

It describes our predicament in a recognizable way and offers an integral framework for the solution. It discusses all parts of this framework separately, elaborating on chain design (including a detailed insight into specific design tools and notation languages for the connoisseur), chain implementation and standardization as a means to reduce the implementation gap, and chain operation.

The surprising conclusion corroborated by this book is that introducing QIE in business reporting is not a matter of technological innovation. We can use the proven power of plug-and-play instruments to take our chains to the next level of business reporting as a service—thus achieving substantial societal aims as well as economic advantages for both inquirers and reporters of accounting information.

This book not only discusses a pending revolution, but marks its very launch.

Business reporting

Business reporting is the formalized process by which organizations or economic systems–privately owned, not-for-profit or public government, and funded to add specific value (goods, services)–exchange qualified information to give account to stakeholders of their performance. Business reporting differs from other corporate communications and publications (such as brochures, advertisements and email) in that it formally entails–and is intended to entail–judgements by those stakeholders, implying legal, social, financial and/or organizational consequences.

CHAPTER I

How Are We Doing?

We spend a lot of time collecting figures.
In private, at work, as societies—in all contexts imaginable.

Our corporations monitor their subsidiaries, participate in tenders and report to stakeholders. As businesses and as individuals, we submit tax returns accounting for turnover, revenue and earnings.
Public bodies at supranational levels rely on data supplied by national governments for supervision.
We want to know a lot. Which stocks have the best prospects?
Which hospital has the best track record for certain illnesses?
Where does our tax money go?

These are just a few scenarios that involve information on performance.
Information that we need to make decisions, either on our own operations or on third-party operations that we rely on.
Information that we need to relay to others in order to meet our reporting requirements.
Information that keeps us busy.

At an organizational level, with large amounts of data involved, this is what business reporting is about.
Either at the receiving or at the delivering end, and often both, we spend much energy on business reporting.
Maybe too much?

Obviously, we collect our figures for a reason. But do we always get or provide exactly the information needed? And do we really need to spend so many resources on it?
If we feel that reporting takes up too much business, it’s time to take a new approach.

Figures matter.
In many cases, performance information is of crucial importance.
We need it in order to make proper decisions for ourselves, or we need to relay it to others, who are then to take certain decisions that affect us—decisions on permits, tax assessments, grants, purchases, policies, hirings or dismissals, to name just a few.

Consequences can be legal, social, financial or organizational in nature, and sometimes far-reaching.
They can either result from the performance information itself, or from its flaws—or, alternatively, from its failure to be supplied.

Unspectacular but painful cases happen every day: should some administrative system register your address incorrectly, you might fail to act on payment requests you never received in the first place—and it tends to be very hard to get rid of a ‘defaulter’ label, unjust or not. A more salient example is the importance of timely estimates of oil reserves, not only for the stock value of oil companies, but also for energy pricing and, consequently, for the global economy. Yet another is the decisive nature of reporting mechanisms in our banking system: failures to relay relevant, reliable figures to the appropriate bodies in due time have aggravated the effects of the latest crisis.

We need to exchange information on states of affairs in order to achieve our goals.

Whether it is according to law, to contract or to public expectation that we are obliged to provide and collect performance information, we have a clear interest in its adequacy, both in terms of inquiring and reporting.

At the inquiring end, we want to be able to trust the information we gather.
It must correspond to actual states of affairs. It must come from sources authorized to report. It must be accurate, useful and sufficient for our purposes.

At the reporting end, we want to be sure we actually provide what is requested.
There must be legal certainty: consequences should be predictable. Provision must be according and limited to purpose: without function creep. And it must be as efficient as possible: reporting should not use up too many of our resources.

So the question is, especially when business reporting turns into red tape: how well-informed are we—and how well-informing?

Figures flow.
In view of the all-pervading importance of performance information, we have business-reporting chains in place in all domains and at all levels of our economies and societies.

Organizations do business with many partners. At times, they receive formal information; at others, they supply it. Even parties that are clearly at the inquiring end of a chain may, in some instances, deliver: for example, when the tax service provides for pre-completed tax returns. In such cases, it is roles, not chains, which change. This book uses a classic many-to-one information reporting chain model, comprising one inquiring and many, comparable, reporting parties. The principles outlined here, however, apply to all forms of qualified information exchange, including many-to-many information chains used for sending quotes and invoices.

Business reporting chains

Business reporting chains are more or less formalized patterns for relaying various types of figures, involving at least one reporting party collecting information on a state of affairs and another, inquiring party receiving and processing this information, with stages in between for proper formatting and transportation.

Considering the amount of energy we spend on reporting chains, we have good reason to give them a closer look.
How do they work?
Do they do what we expect them to do?
How adequate are our figures, and how efficient are we in collecting them?
And, if we have reason to be dissatisfied with the process, the outcome or both, how can we do better and transform our reporting chains?

CHAPTER II

The Business of Reporting

At first glance, a typical reporting chain consists roughly of three steps:

         Preparing business reports

         Submitting and accepting business reports

         Processing business reports

To begin with, let’s see how we usually perform in each of these steps.

Preparing business reports

For many of us, reporting begins with an incoming request from an inquiring party for a report of some type.

Although most requests are repetitive and, to a certain extent, predictable, they somehow always come at the wrong moment. We have business to do. Or, if we have report-dedicated staff in place, we just can’t provide them with the necessary information right now, because—we have business to do.

As soon as we’re no longer able to put things off, the request triggers a slow, labour-intensive, error-prone process in which we are to produce the required report. It involves a wide diversity of repositories from which we have to extract relevant information, and a lot of manual work to assemble this information into the required report format: tracing, looking up, comparing, entering, re-entering, calculating, double-checking, correcting, reformatting…

We have to interpret and re-interpret what’s required. Whenever definitions of used concepts are absent or unclear, we either take them for granted or make a guess at what’s intended, without giving it much thought. We may wonder what they would want to know this for, or discover that data are mandatory that we have not been recording, or have recorded in a different format, or at levels completely other than those required. In such cases, we’re lucky if we can make reconstructions or rough hindsight estimates.

Time is pressing, and when we finish the report, it is with a feeling of relief.

Next time things should go a bit smoother and easier, shouldn’t they? Why the fuss?

Submitting and accepting business reports

Just before the deadline, we manage to submit the report.

We send off a batch of paper, email a set of excel files, re-enter all data into a website form and press a certain button after having dug up and tried various login credentials—we perform some combination of any of these actions.

Now we enter a period of tension.
Has our report arrived at its destination? (Can’t they just send a simple confirmation?)
Does it comply with the requirements? (How difficult can it be to check this immediately?)
Will it be accepted? (When should we receive an official announcement?)

At the inquiring end, we receive a lot of reports at once. Everyone submits just before the deadline. Staff who may have been waiting idly for days or weeks are now overflowing with work. So let’s start processing the reports and entering the data into our systems without delay.

But soon we discover that reports contain annoying errors, or that data are lacking. Why did they leave this out? Couldn’t they just add that up? Can’t they answer or even understand an elementary question?

We begin making phone calls and writing emails in order to complain about missing information, and to ask for it—because we need it now: forms in our systems can’t be left with blank fields. Quite a chore, and rather tedious, but that’s the way it works. Everybody knows this and it’s our job to deal with it. Were it not for us paying attention, how would they be able to report properly at all?

At the reporting end, the greater the feeling of relief upon finishing the report, the greater the annoyance when, after submitting, the inquiring party comes up with additional questions.
What did we do wrong? But we did turn in these data! Those questionnaires are completely unclear…
Apparently, they don’t know how to ask properly for what they need in the first place.

Movements in both directions lead to friction, and friction may lead to irritation.