Real time financial information is entirely possible, but we need to be very clear about what we mean. Accountants often think in terms of financial vs. non-financial information, but that completely misses some very important points. It is more useful and less confusing to think about monetary information. I differentiate between 2 major categories of monetary information: (1) monetary information which complies with generally accepted accounting principles and external/regulatory financial reporting standards (I suspect this is what is most often meant by “financial”), and (2) monetary information which reflects operations based on causal resource and process relationships.
RCA focuses only on the second category. RCA creates a causal model of operations that shows the flows of resources within the organization, if no operational model exists. If an organization has a real time operational model, such as a manufacturing enterprise solution, enterprise resource planning solution, or logistics model, RCA uses those models to the extent possible. The RCA approach is to collect monetary information that reflects the use of resources and processes throughout the organization (not just production or service delivery) as accurately and quickly as is necessary to support the economic decisions managers and employees need to make. My financial reporting-oriented colleagues will argue that this must involve estimates, and they are correct. But using a correct model with reasonably accurate data will get you a much more accurate (and much timelier) answer than using a wrong, slow with perfect data. RCA monetary models create a plan, a target, and an actual. The planned monetary result is what you expect will happen in the future. The target monetary result is what should happen for the actual level of resource use and output generated based on the monetary model. The actual monetary result, which often isn’t known until somewhat later, is what really happened. Overtime, with experience, the monetary model is refined, particularly for the target results, based on feedback from actual monetary results.
Does this mean the first category of monetary information is ignored by RCA? No, it can be reconciled at the input and output level to ensure organizational confidence. But each model has its own uses, perspective, and requirements. Neither is better or superior, they are different applications of monetary modeling – one based on financial reporting standards, and one based on the causal relationships among resources used, processes, and customer requirements. The ability to provide real time monetary information for decisions is increasingly becoming a necessary characteristic in today’s economy.
RCA makes possible a real-time monetary model that reflects resource, process, operating, and customer causal relationships.