Remarkable reporting – a skill to keep you out in front

Hirers want to find professionals with strong reporting skills – here’s how to get them.

Talk to recruitment experts about hiring trends in finance amid the coronavirus crisis and a common theme emerges: businesses want to see more financial and management information, while shareholders want to know how their money is being spent.

What is reporting?

So what makes for great reporting?

“I’m sure if you ask loads of different accountants, you’d get lots of different answers,” said Andi Lonnen, founder & CEO (chief energising officer), Finance Training Academy.

First of all there is statutory financial reporting, the quarterly and annual financial statements to be filed with Companies House. The size of a business will dictate how much information needs to be included – the smaller the company, the less it will have to report; while for a publicly listed business exposed to capital markets, more information will be required to provide transparency and prove solvency / liquidity.

Then there is reporting that can provide insight into a business’s “live” operations and performance. This is often referred to as the management accounts, which can combination financial and whatever other data and information a company wishes to see to form a bigger picture.

Such reporting supports management decision-making and adds more value than the statutory reports alone, which are ultimately backward looking and quickly out-of-date – management are unlikely to base strategic decisions on financial information that can be over a year old (in the case of annual reports).

And such insightful management information is no longer exclusive to large organisations with big budgets. Digitisation, cloud accounting and big data mean now more than ever SMEs can see unique, tailor-made information about ongoing performance.

“The most value for a business owner is to give them information in as near to real-time as possible,” said Alastair Barlow, co-founder and chief dreamer at flinder, a practice that embraces the digital opportunities of modern accounting. “The purpose of management or financial reporting is to provide answers to questions: What’s going on in a business? Is it making a profit?”

Taking a broader approach to reporting can help companies and investors focus on what drives value now and into the longer term, said Rebecca Farmer, partner, Financial Accounting Advisory Services, EY.

“Well-structured external reporting, which makes a strong link between a company’s purpose and strategy and the outcomes it intends to deliver for its key stakeholders, provides investors with useful information on how a company intends to drive value both in the near and longer term, and on how it manages risks that could diminish that value.”

How do you do it?

There is no one-size fits all and reporting varies depending on the size and nature of a business. Nevertheless, due to the evolution of cloud accounting and big data, accounting practices, finance departments and SMEs have access to more information than ever before. And while it’s still common for reports to come as PDFs, Word documents or PowerPoint presentations, they can also come as advanced interactive visualisations.

Cloud accounting systems, such as Xero, QuickBooks or Sage, to name a few, have been developed for ease of use and ability to process and present financial data in real-time. Combined with the ever-growing ecosystem of apps that plug into these accounting systems to perform all manner of tasks, analysis and visualisation, modern reporting is at many more people’s fingertips.

Yet such technological gains should not obscure the fundamental strengths of reporting as a form of communication.

The PACE approach

To this ensure reports communicate well, Lonnen follows the PACE model: Purpose, Audience, Content, Engage.

Question the true purpose of the report. Accountants can be accused of writing endless reports. “Pause for a moment and ask what the report is trying to achieve, is it needed anymore? Be strategic in your approach before you even put pen to paper or use data.”

The audience is everything, it’s what will provide the report focus and direction. “A board report will be completely different to a management report, as it will only need really high level details, while a management report might need more information to help managers make decisions,” Lonnen said.

Simplify, simplify, simplify!

The clarity of the content is vital. “No matter the audience, simplify, simplify, simplify, because a lot of the people reading these reports will not have finance expertise,” she continued. “We often forget that our years of training, qualifications and experience mean we use the words we’ve learned instead of translating them into something simple. If you want to tell the story behind the numbers, then remove financial jargon to keep things as clean as possible.”

And finally, engage. This will depend on the audience. Don’t lose sight of what they care about. This could be managers wanting to know if they’ll get regular bonuses, or if a company will be able to invest in a project, or seeing which product lines are profitable, or understanding customer behaviours. It’s no good having a report that’s pretty looking with a wealth of clever-looking data insights if it doesn’t address its purpose and answer the audience’s questions.

Types of data that can be blended and reported

Statutory (external) financial reporting Management accounts reporting Other types of data
Income statement Profit & loss report Website data – traffic, new users, subscribers
Statement of comprehensive income Balance sheet CRM – Customer Relationship Management system
Balance sheet Cashflow Sales – orders, purchases, types of payment
Statement of cash flows   HR – productivity, culture, hiring
Statement of stockholders’ equity   Sustainability / environmental impact
Quarterly and annual stockholder reports   Marketing & social media – campaign data, performance
    Advertising
    Any other data a company has

A rough example

For Barlow and flinder, the idea is to provide rich and insightful reports that are relevant to stakeholders. This involves a six-step process based on six key principles of management information.

flinder’s six steps to designing a reporting blueprint flinder’s six principles of management information
Identify stakeholders Rich (segmented)
Explore current reporting Real-time
Stakeholder questions Integrated
Design metrics Business-wide (heterogeneous)
Identify data sources Aligned to strategy
User preferences: How is the report presented? User friendly

The insight that flinder can provide a business can go a little something like this: Over May-August monthly online revenue shows a steady increase, which is good. But add in non-financial information, like online customer levels and web traffic, and we see these are inconsistent. Add in online conversion rate and average order value data, both of which are falling, we see that key growth drivers are not optimised – the business’s revenues over these months could have been higher.

“Bringing in non financial data to enrich financial data is extremely powerful,” said Barlow. “Often, financial data can tell us what has happened, but it can’t tell us why it’s happened.” But by adding in the extra data in the above example, flinder are capable of showing a client lost potential and therefore begin a conversation about how to address.

Who uses the reports?

  • Owners
  • Managers
  • Investors
  • Banks and lenders
  • Accountants
  • Auditors
  • Tax planners

What do businesses do with reports?

“We want businesses to take action from what we deliver,” said Barlow.

This means questions and engagement, hopefully.

“Historically there were very rarely any questions,” said Lonnen. “They didn’t really know what questions to ask and they didn’t want to look foolish, but now it’s all in English, people are more confident. It’s really good when you get questions, because then you understand their map of the world, which means that you can tailor your information even more tightly to what the audience needs.”

This is where accountants can do more than merely deliver a report and walk away. They can become business partners that support businesses to grow and improve.

“Reporting in this way is completely under-tapped,” said Barlow. “The technology can definitely make reporting look prettier and a bit more relevant, but really it comes back to the accountants and their skillsets. Their ability to tailor the reporting, aligned to the business strategy, understand the business model, and have the communication and partnering ability to translate it to action. That’s really important. And that’s not getting taken away by any technology anytime soon.”

How can reporting help a business?

  • Assess key performance indicators and metrics to get a ‘heads up’ of the live business
  • Improve decision-making
  • Improve profitability
  • Rate financial performance between entities or offices
  • Increase sales
  • Understanding risks to the business and future-proofing
  • Managing working capital, cashflow and trading volumes
  • Can uncover bad practices and business areas to improve or transform
  • It can reduce overall accounting costs
  • Various operational controls: establish sales break-even points; overheads and stock levels; manage debtors; bank positions
  • Among other possibilities deeding on the business, it’s size, sector and ambition

What skills do you need to do reporting well?

Knowledge of up-to-date legislation and a technical background afforded by an accountancy qualification are a basis. More broadly it helps to be able to combine an eye for detail with an eye for the big picture, to be able to combine a detailed understanding of the business with the eye of a well-informed reader, said EY’s Farmer.

“This means that you need to be comfortable that the data being communicated is not just complete, well-controlled and comes from reliable sources, but that taken together the results and accompanying narrative provide a fair, balanced and understandable view of how, and how well, the business is delivering value to its stakeholders.”

Modern reporting requires strong IT skills to work with the variety of software and database systems commonly used in financial reporting said James Brent, director at Hays Accountancy & Finance. Though less obvious and equally as important are good verbal and written communication skills, given the importance of telling the story of data in a non-financial way. “You’ll almost certainly be required to summarise your work to people who don’t have your level of technical knowledge, so the ability to communicate clearly to different target audiences is much needed.”

Neil Johnson is a freelance business journalist who contributes regularly to trade publications and member organisations, covering employability, recruitment, business trends and industrial analysis.

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