The value of information –

Accountants should aim to provide the right information to the right people in the right quantity at the right time, and at minimum cost. This raises the question as to what is optimal quantity, content, accuracy and speed of transmitting information. These alternatives have different costs and values, and it is clear that accountants should bear this in mind when collecting and presenting accounting information. Any design and implementation of a management or financial information system must bear these factors in mind. The system must be robust enough in meeting a variety of different requests. At the core of such requests and analysis will be the information itself. The quality of data should be aimed at reducing long-run costs for business in areas such as search costs, bureaucracy and labour. Also, better quality decisions might be made by postponing a decision until more information or information of greater accuracy is available. An effective and efficiently designed MIS will aid the process of making informed quality decisions, quickly.

In general terms there is normally a trade-off between speed on the one-hand and accuracy and quantity on the other. We should therefore compare the costs of improving information systems with the potential benefits that will likely accrue in the future. The relationship between costs incurred and the value of information provided is an important one.

How do we ascertain the value of the benefits of providing information? In theory, we should evaluate the consequences of taking each decision with a given amount of information; we then evaluate the consequences of taking each decision when extra information is available, and we use the difference between these two figures as a measure of the value of the extra information. If this value is in excess of its cost then the information should be produced.

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