[tweetmeme source=”atripathy” only_single=false]The theme of this blog is to understand how actionable information in form of decision support tools will lead to next wave of efficiencies and competitive advantage. However, the reverse is probably more stark. Not investing in the table stakes data aggregation and reporting process capabilities can also hurt, and it can hurt big time.
The financial crisis in Greece is a case study on how easy money and uncontrolled government spending during boom time can come back to hurt in a weak economy. However, one of the confounding factors has been the Greek government’s repeated revisions of its budget deficit data. In 2008, it reported the deficit to be 5.0% of their GDP in April. Later that year they revised it up to 7.7%. Similarly, in 2009 April, the official forecast figure for the deficit was 3.7% of the GDP which was later revised to 12.5% of GDP. It is the last revision that started the full blown crisis.
Digging a little bit deeper, it is easy to discover that one of the key reasons for revisions. It is the lack of a modern budgetary process and financial reporting system.
Past budgets have rested on some 14,000 separate expenditure lines. This year’s has brought the figure down to about 1,000. In this system, the evaluation of public spending in any particular area is almost impossible. The amount spent on education, for example, is defined as the total sum of money allocated to the Ministry of Education and it is very difficult to monitor where it goes. Currently, most of Greece’s 15 ministries and dozens of other government bodies handle their own payroll accounts, making it difficult to gain a complete overview of government spending.
No wonder, they could not trace reliably how much money was being spent!
Last year, the Greek government had also approached the OECD to conduct a study and recommend improvements in its budgetary processes, and one of the recommendations was around managing the deployment of the new accounting and financial information system.
Ill-defined processes and weak information management systems tend to exist in certain quarters of most organizations. The key question to ask yourself is whether this under-investment in information systems:
1) exposes you to a big risk
2) makes you inefficient or
3) prevents you from gaining some potential competitive advantage?