Introduction

This blog is the third in a series I am producing once a week.  There are many topics we can discuss under Corporate Finance.  This series will include a subset of topics, including the following:

• Chart of Accounts
• Project Costing
• Reporting
• Model Set Up
• Forecasting
• Budgeting
• Program Based Fixed Asset Management

It baffles me when I see reports that don’t tell a story, or are plagued with inconsistent information, or loaded with too much information for the viewer to understand status.  So, let’s start this blog with what should a report achieve: Tell the story, in as few words as possible, with consistency and accuracy, in a format that is “kids and management friendly” 😊.  The following dives into each part of this target as a guide to better reporting you will get praised for (as I have every time I create a new report).

My approach is based on my experience, what is yours?  I write these blogs in hopes that it may help others.  I prefer to blog what I have learned from experience, not just a rewrite of what I found on the internet.  I also prefer collaboration over critique, so please comment only if you have something constructive to add.

Reporting

We touched on what a report should achieve, so we will start with that because it is general and encompasses how you should approach a new or revision to most reports.  Then I will relate to financial reporting as an example.

How to Approach Reporting:

• Tell a Story: Do NOT just put a few reports on a page and call it ‘done’. Proper reporting should tell a story of what is happening.  You remember writing class, with the ‘introduction, body, conclusion’?  Well, this applies here.  A report should tell you what you are going to read, then provide the content, then a conclusion.  This is true whether in a word document, or in a single PowerPoint slide.  It should be in a sequence that is logical and easy to follow.
• Few Words: How many times have you looked at a report, and it is swarming with information, so much that it is difficult to decipher. It is fine if the data groups are massive, and you want the reader to be able to dive deeper into the numbers/categories BUT it should not start there.  Always start with a summary that shows the ‘big picture’, then supplement the summary with more details as you run through a presentation, or if the reader chooses to dive in.
• Viewer Friendly: Speaking of ‘big picture’, we also remember that a picture is ‘worth a thousand words’. Well, this is true with a report.  Anything you can do that allows the reader to understand the status through imagery is the most efficient way to communicate.  Even better is that images require less reading by the viewer, with quick understanding for discussion or presentation.  This is where the art side of reporting makes the difference between a veteran report designer and an apprentice.  Defining the image to tell the story, including the range, colors, type, size, and format will reveal a first impression about the creator and their report.  If there is a cluster of reports, then an example is making one larger than the others because you want the reader to see that report first.  Colors and bolding words can also direct where the reader will focus.  The art incorporates human behavior, so the report creator is directing the reader experience.
• Consistent and Accurate: Consistency comes from having a report designed to generate in the same format every time. Autogeneration of the report with no manual manipulation is the best way to be consistent.  Consistency is important for the viewer to understand the report quicker than if it was for the first time, and helps build the viewer confidence in the report.  I have found that accuracy is underrated by some report builders and should never be underestimated.  I have seen report creators rush a report to a meeting that was not reviewed first, and usually leads to an embarrassing and long-term negative opinion of the creator.  It is better to be late and review, but if not possible, then footnote that the numbers preliminary and need further review.  Once someone finds an error in a report, it takes a long time to rebuild that trust.  Always review before posting, or if it is autogenerated directly to the reader then you need to generate and review consistently before others do to prevent a fire.  A little review time saves you from a catastrophe.

Example: When I present financials, I start with top level summary.  The summary is typically a quadrant that shows key drivers, and either to the left, right or bottom I will then have comments that are the ‘take away’, or conclusion, from the report.  You should target no more than 7 comments with 7 words each, its not firm, but a good guide.  The quadrants can be Income Statement, Balance Sheet, Cash Flow, and a Revenue Summary by category.  As an example, the Income Statement quadrant can be the quarters up top, with total actuals vs budget for the year and YTD.  The rows would be Sales, COGS, Gross Margin, S&M, Other Expenses, EBITDA, and Net Profit.  Very high level, but enough that comments can shed light on the trends or deltas.  Then we dive in one level of detail, like a sales report, or departmental that are first summarized by executive, then down to VP/director based on the cost center (see chart of accounts blog).  Each report has an introduction, body and conclusion (take away). 

One last thing: footnotes, yes footnotes.  When you build the report, if there is something important to note (not a comment or analysis that would otherwise belong in the report comments) then that goes in a smaller font at the footer.  It is typically something about the filters applied to create the report that are not already in the report.  Date range may be in the report as a header, but maybe you excluded something because it sways the results away from the ‘story’.  When you do something that is not stated in the report, make sure your reader knows by placing it in the footer as a ‘Note’.  If you don’t then they may question your accuracy.  Must maintain confidence of the reader.

If you have other methods for reporting, please share.

As always, Contact Us to learn more!

About the Author

Travis King’s educational background is a dual degree in Accounting and Finance from University of Arizona, along with an MBA from UC Irvine.  His operational background is a mix of management in Accounting, Finance, Operations, Program Management, Design and Corporate Strategy.  He has worked in beverage distribution, defense, automotive, software and recreation industries.  He has led projects in forecasting financials, running market data, massive software migrations to SAP, reporting, budgeting, MRP and conducting data integrity audits.