Most company executives don’t want to pore over financial reports. They want to make decisions—quickly, confidently, and ideally based on the current situation, not on data from weeks ago. That’s why we believe a good financial report isn’t just a monthly Excel spreadsheet or an accounting statement.
At many companies, reporting is still seen as an administrative task. The finance department collects the data, the spreadsheets are prepared, and then management receives a multi-page document filled with numbers, perhaps with colorful, attractive but uninformative charts. These reports are often too detailed, difficult to navigate, and by the time they’re finished, some of the information is already outdated.
Managers, however, want to know whether profitability is growing, whether cash flow is secure, which business units are performing well, what the current accounts receivable are and what they will be tomorrow, where costs are rising too quickly and why, or what trends can be expected in the coming months.
According to a McKinsey study, the role of financial executives has undergone a significant transformation in recent years: instead of traditional reporting, they are now expected to provide strategic business support. The CFO’s role is not merely to provide data, but to help interpret it—perhaps by highlighting trends—and to support executive decision-making. (Source)
That is precisely why simplicity is one of the most important qualities of a good management report. It isn’t the inclusion of twenty different tables that makes it professional, but the fact that the most important information can be reviewed in just a few minutes. An executive doesn’t have time to read through lengthy analyses. The report must show quickly and clearly what needs to be addressed now, tomorrow, and next week.
It’s just as important that the report not only show what happened yesterday and last month, but also why. The fact that profits are falling or costs are rising is, in and of itself, insufficient information. The real value lies in the report highlighting the connections—for example, making it clear that the decline in profits is caused by lower performance in a specific business unit, rising raw material costs, or a decrease in capacity utilization.
iFinance’s analysis of executive reports refers to this as “drill-down capability”: the executive first gets a quick overview and can then analyze the data at increasingly detailed levels as needed. (Source)
Speed is also becoming increasingly important in modern corporate management. A report that takes several weeks to complete is now so slow that by the time it’s ready, it’s already obsolete. Managers rely on daily or weekly information, especially regarding cash flow, sales, or project profitability; for this reason, modern financial systems are increasingly built on real-time or near-real-time data processing.
And let’s not forget about “supportive” visualization. Well-structured dashboards, charts, and graphs can be interpreted much more quickly than long spreadsheets. A well-designed executive dashboard can show in a matter of seconds which areas are performing steadily and where problems exist or may arise.
According to international analyses of CFO dashboards, one of the most important roles of modern financial reports is to transform complex data into easily interpretable visual decision support. (Source)
Moreover, a good report isn’t focused on the past. It is no longer enough for executives to know what happened last month—they also need to see what to expect in the coming period. For this reason, forecasts are becoming increasingly important. A modern financial report can show how a company’s liquidity might look in six months’ time given a specific growth rate or cost level.
This is particularly important for corporate groups, where harmonizing and consistently interpreting data from multiple companies is a significant challenge in and of itself. In such cases, reporting is typically based on a central data warehouse and an automated data integration system, which ensures that every executive—and the owner—sees the same numbers.
According to Oracle’s summary on CFO KPIs, one common characteristic of successful companies is that their reporting systems are directly linked to business strategy and decision-making processes. (Source)
Ultimately, the most important question is not how much data a report contains, but whether it helps you make better decisions.
If you want to make better decisions, contact us!