Why ad hoc analysis must look beyond its original purpose

According to the Merriam-Webster dictionary, the word "ad hoc" comes from Latin and literally means "for this." In contemporary English, anything described as ad hoc exists "for this purpose only." Despite this narrow definition, ad hoc analysis for financial decision-making must look beyond the specific purpose and take the bigger picture into consideration.

For example, a finance team is asked to explore options to save taxes for the company. The team exerts reasonable efforts to research and develop a tax strategy designed to meet the tax savings goal. However, when the analysis is expanded to scrutinize the impact of the strategy on the company's financials—such as EBITDA and net income—it reveals that net income would actually decline. This illustration perfectly demonstrates why we shouldn't miss the forest for the trees. Company-wide KPIs and financials must always be considered when performing any ad hoc analysis.

If you need assistance with ad hoc analysis, contact VMC.

VMC's views are general insights—not one-size-fits-all advice. Every company's situation is unique.