Question 85 - CBDA discussion

Amedt

Edited 8 days ago

Voted B

The Situation: The finance manager is concerned that customers are taking longer to remit payments this year than last year and is considering offering a 10% discount to encourage quicker payments. Before implementing this solution, they want the analytics team to conduct research to understand whether offering a discount is the right approach and whether it will be effective in improving the accounts receivable situation. The Importance of the Research Question: The key to solving the problem lies in identifying the root cause of the delayed payments and evaluating the effectiveness of offering a discount. Therefore, the research questions must be designed to either: Understand the cause of delayed payments (e.g., are customers struggling to pay due to broader financial issues?). Evaluate the effectiveness of offering a discount to improve payment behavior. Now, let’s revisit the options: A. Have discounts been offered before? Pros: This is indeed a valid research question because it would help gather historical data about whether discounts have been effective in the past in improving payment behavior. If discounts have been used before, it can provide insights into whether they were successful in encouraging early payments or if customers took advantage of the discount but did not significantly improve payment behavior. Cons: While this is an important question, it is more of a historical inquiry. It doesn’t directly address the underlying cause of delayed payments or whether a discount is the most appropriate solution for the current situation. It focuses on past behavior but doesnt necessarily help to understand whether there is a broader problem, such as decreasing sales or customer financial difficulties. In essence, A helps evaluate the effectiveness of discounts as a strategy but does not fully address the broader context of why payments are delayed in the first place. B. Are sales decreasing when accounts receivables are increasing? Pros: This question is focused on understanding whether there is a correlation between sales and delayed payments (i.e., increasing accounts receivable). If sales are decreasing and accounts receivable are increasing, it could indicate a broader cash flow issue, which might be contributing to delayed payments. This would help identify whether the delay is related to customer behavior, or if external factors (like sales volume) are affecting the ability to pay. Cons: While the question provides valuable context, it doesnt directly assess whether offering a discount would solve the problem. It is important to first understand the cause of delayed payments (i.e., whether its linked to declining sales or other factors) before deciding to offer a discount. Conclusion: This is a critical question because it helps to understand the root cause of the issue and whether the problem lies within sales performance, cash flow, or something else, which could influence whether a discount is an effective solution. C. How does credit score impact the customers ability to pay? Pros: This question could be useful for assessing whether customer creditworthiness is influencing their ability to pay. If certain customers are struggling due to poor credit, this could explain why payments are delayed. Cons: This question is too specific and focuses on individual customer factors rather than the overall trend of delayed payments. It does not address whether offering a discount would be an effective solution, nor does it help understand broader patterns that might explain the overall accounts receivable problem. Conclusion: While relevant, this question is narrower and not directly aligned with understanding the bigger picture regarding the overall accounts receivable issue. D. Should the discount offered be set at 10% or 15%? Pros: This question is important when you are ready to decide on the exact discount offer. Cons: This question assumes that offering a discount is the correct solution without first understanding whether the discount will actually address the core problem (i.e., why payments are delayed in the first place). It does not help to clarify whether offering a discount will solve the issue or if there is a broader trend that needs to be addressed first. Conclusion: This is a tactical decision to be made after the research and data analysis have been done to assess the problem more clearly. Final Answer: After considering the various options and analyzing them in the context of the situation, the best research question is: B. Are sales decreasing when accounts receivables are increasing? This question will help explore the root cause of the accounts receivable problem and determine if there is a bigger issue (e.g., decreasing sales or declining customer purchasing power) that could explain the delayed payments. Understanding this relationship will help the finance manager make a more informed decision about whether offering a discount is the right approach. Why A is less optimal: While A. Have discounts been offered before? is a valid question, it is more focused on historical data about past discount effectiveness, and it doesnt directly address the cause of the delayed payments or provide insights into whether discounts are the best solution. B is a broader question that helps understand the underlying problem that may guide whether a discount is actually effective in addressing the issue. Citation: As per the IIBA Guide to Business Data Analytics, identifying the right research questions is crucial for guiding analysis and ensuring that decisions are based on relevant, measurable data. The research questions should help address the root cause of a business problem and provide insights that inform actionable solutions (IIBA, 2022, p. 67).

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