Financial Intelligence NCIA 2016 National Training Conference Pittsburg April 18 th & 19 th

Financial Intelligence NCIA 2016 National Training Conference Pittsburg April 18 th & 19 th

What is financial intelligence? Financial Intelligence Overview of Training Topics Process for developing key performance indicators (KPIs)to align with your strategic action plan Developing meaningful financial dashboards to visually display results Methods of responding to variances in your KPIs

Financial Intelligence Also known as business intelligence Also know as lean accounting Can be described as a set of techniques and tools for the acquisition and transformation of raw data into meaningful and useful information for business analysis purposes. Otherwise, Making data interesting

Lean Accounting The financial information we were presenting to the organization wasn t useful and was confusing to most people and I didn t feel it was RESPECTFUL To provide financial information to people that don t understand finance.

Lean Accounting Lean manufacturing : Continuous Improvement with Respect for People Correctional Industries lean journey began in 2007 with a goal of: Reduce inventory Reduce production lead times Reduce defects / reworks Clean and organize the work areas Improve customer satisfaction

Business Intelligence

Business Intelligence Building a sustainable system through lean principles and methodologies.

We needed to do something different!

Stakeholders were frustrated because They were being measured by their: Financial performance Operational performance Customer feedback But yet they didn t have the tools to be successful

Key Performance Indicators

What are Key Performance Indicators (KPIs)? Quantifiable and Measurable Tied to Business Goals and Targets Critical to the Organization

Pro-Social Skills Improve Core Business Practices Technical Skills Goal: Post-Release Employment Vision: Transform lives and increase reentry through training and mentoring Partnerships Focus on the workforce Change Offender Behavior

Developing Key Performance Indicators Step 1 Identify the results you expect Ensure they align with your strategic plan Example: Increase Offender Employment

Developing Key Performance Indicators Step 2 Establish the numbers the company needs to reach its goals Example: Increase Post-Release Employment from 30% to 40% by 2017

Developing Key Performance Indicators Step 3 Identify the progress that has occurred so far to develop an understanding

Developing Key Performance Indicators Step 4 Determine the % of change over time and take a closer look at the numbers

Developing Key Performance Indicators Step 5 Establish the frequency of reviewing your KPIs

Financial Dashboards

Financial Dashboards Why they matter Encourages storytelling through graphs and visuals Creates an environment for organizations to highlight meaningful variances in financial reports Seeing the numbers visually prompts questions such as: - Why did our profit margin drop in August? Optical Profit Margin Profit Margin Ratio Target PMR 25% 80% 60% 40% 20% 0% -20% -40% Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16-60% -80% -100% -120% -140%

Financial Dashboards Why they matter Dashboards are effective tools for ensuring financial comprehension and engagement among stakeholders -Remember: Don t assume your audience is knowledgeable about business and finance Dashboards create a common language for those less driven by financial data Dashboards prevent

70% Dashboards Raw Material Usage 60% 50% 40% 30% 20% 10% 0% Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Furniture RMU % Comparison RMU Forecast RMU Actual

Measuring Raw Material Usage (RMU) Accuracy

Measuring Net Contributions

Measuring Inventory Levels

KPI: Lower Inventory by 20% 30,000 25,000 20,000 15,000 Laundry Inventory 10,000 5,000 - Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16

Performance Dashboards

Case Study: Food Manufacturing and Distribution

Case Study Net income was decreasing, and Profit margins were decreasing

Food Mfg. & Dist. Net Income 2014 $400,000 2015 $300,000 $200,000 $100,000 $- $(100,000) $(200,000) $(300,000) $(400,000) Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Responding to Variances Don t Wait, Act Immediately! Performed a Root-Cause Analysis Supply Chain Management Lead Time Reduction Production Throughput Organizational Structure Product Mix

Food Mfg. & Dist. Net Income $400,000 2016 $300,000 $200,000 $100,000 $- $(100,000) $(200,000) $(300,000) $(400,000) Jul Aug Sep Oct Nov Dec Jan Feb

Food Manufacturing Profit Margin

Food Manufacturing Dashboard

Getting to know your Business

My Challenge to You! Go to the floor and understand what s going on! Meet the people in the business Understand what s happening on the production floor Join them during their daily huddles Discover what your role is on the production floor Ask them: Does this information make sense? How can finance improve the information?

Results

Review Process for developing key performance indicators to align with strategic action plan Development of meaningful financial dashboards to visually display key performance indictor results Methods of responding to variances in your key performance indicators

Questions? Jeannie Miller Assistant Director Correctional Industries WA jeannie.miller@doc.wa.gov Andrea Annie Severson Senior Project Management Specialist Department of Corrections WA andrea.severson@doc.wa.gov