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Reporting series – Post 3: Formatting reports for ease of understanding

in the first post of this series I talked about how to structure the chart of accounts so that the end report would look appealing or at least more appealing than it otherwise looked.

So what are some other ideas that allow your financial reports to be more useful and more appealing, especially for non-financial managers?

This all goes back to assessing the business needs. Talk to senior management and understand what their needs are in relation to reporting. I mentioned in the first blog post that there are options with setting up each part of the report that will allow it to be more visually appealing and useful. For example dividing revenue into the different product lines that the business sells, and having associated gross profit lines, versus having revenue lines divided but only a single gross profit line.

The difference between these two reports is that in the first you will clearly be able to see gross profit generated per product, whereas in the second you will only be able to see a single gross profit figure.

In the second post, I discussed separating expenses so the list of expenses can be separated into groups of similar expenses. For example I talked about premises expenses, but this could also apply to communications expenses, admin expenses, marketing expenses, staff expenses, and travel expenses. If there is another grouping specific to the business (such as Logistics for a freight business) then I will include that as a grouping as well. Each of these groupings and possibly other groupings will undoubtedly be an area of focus for the CEO or owner or functional managers so why not make it easy by grouping them?

There are a few formatting tips that help here as well: for example why not leave a gap underneath each subtotal, and shade key lines such as total revenue, total cost of sale, total gross profit, total expenses, and Ebitda or net profit. This then makes it easy for people to see the key lines in your report.

The added benefit of these groupings of expenses and even revenue is that when you’re analysing the business as part of the reporting, it makes ratio analysis or certain operating analysis, such as marketing as a percentage of sales, that much easier when all related expenses are grouped.

It may also help functional or divisional managers when all expenses relating to an area are grouped like this.

We try to make action plans easy to make and review. The key to this is good reporting. Not just accuracy and timeliness but also understandability. In an earlier blog I talked about getting the chart of accounts right. Formatting and grouping of expenses (and revenue) to allow easier visual understanding is just as important.

The great news is that in most cloud systems these days, this structured reporting is quite simple to do within the system, so it eliminates the need for rejigging in Excel to make reports more visually appealing. Xero is our weapon of choice at Navigate. Xero has made it just so easy to set this stuff up well, it’s a shame not to do it.

When showing a new structure and formatted report to CEO or owner, the look of renewed understanding and enlightenment is possibly the most common, and gratifying, reaction we experience.

THen the real fun starts – engagement goes up a notch and they want further changes to the report, which I love, as it’s this buy-in that drives action. With this engagement in the numbers and what’s behind them, the action plan will be on-point. Which is the key after all…..