Event to Knowledge or E2K
How long does it take for an event that occurs to be reported in a financial statement, management report or transaction log? If a manage receives reporting on the 10 day following the month end close (at one time, not a bad timeline) then his Event to Knowledge (or E2K) ranges from (best to worst):
- 10 days old, e.g. an event occurs at the last moment of the month end and the manager looks at his reports first thing in the morning on the 10th day. The Minimum E2K value is thus 10 days.
- 25 days, the average assuming a 30 day month. That is an event occurs in the middle of a 30 day month and is report a further 10 days after the month end close. Average E2K is 25 days.
- 40 days, is the maximum E2K. An event occurs just after midnight on the first day of a new fiscal period and the first a manager hears of it is 10 days after close.
The point being, of course, is to reduce your E2K values as close as possible to zero. How do you do this? Through virtual closes, online reporting and unexpected event announcements from your financial system.
Event to Knowledge was my first journal publication. More than a decade on, I still think that it is a good metric for finance departments to consider and as a performance measurement so as to improve value to their internal-clients or external readers of financial statements.