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6 Management Reporting Best Practices To Create Effective Reports

working on management reports on computer and paper

Management reporting is a source of business intelligence that helps business leaders make more accurate, data driven decisions. However, these reports are only as useful as the work that goes into preparing and presenting them. In this blog post, we’re going to give a bit of background and context about management reports, and then we’re going to outline 6 management reporting best practices you can use to make sure your reports are effective. We’ll also examine for some of them a management report example that illustrates these best practices in action. By the end of this article, making stunning and useful management reports will be second nature to you. But before we get into the nitty gritty, let’s give you a bit of background.

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What Is A Management Report?

Management reports aim at informing managers of different aspects of the business, in order to help them make better-informed decisions. They collect data from various departments of the company tracking key performance indicators (KPIs) and present them in an understandable way. They basically show the worth of your business over a specific time period by disclosing financial and operational information. Management reporting provides insights on how the company is doing, empowering decision-makers to find the right path to increase operating efficiency and make pertinent decisions to remain competitive.

Let’s now go over the history of management reports, where they come from and how they have been developed.

In the beginning, financial reports

Most people in business are familiar with financial reports, which your company is required to keep for external accounting purposes. These reports are generally put out “after the fact” and follow a very clear and established set of guidelines known as Generally Accepted Accounting Principles (GAAP).

While these reports are useful for legal purposes, they’re not ideal for decision-making. They give you a bird’s eye view of your business operations, but without actionable insights or granular data that are useful for making strategic choices. They’re also slow. As Tyrone Cotie, treasurer of Clearwater Seafoods says in the 2015 Benchmarking the Accounting & Finance Function report, “…no matter how quickly you compile and release historic financial statements, you never make a decision off of them. The challenge for finance is getting timely and accurate analysis that’s forward-looking and helps us make decisions.”

This mismatch between usefulness and reality is because financial reports were never designed to be useful: they were designed to satisfy legal requirements.

Trying to make financial reports useful

This mismatch led some companies trying to make their financial reports into decision-making tools by including additional information in them. While this approach has some merit, it has one big drawback: increased complexity and time cost. Considering that financial reports have to hit certain deadlines, and that any additional information will cause them to be prepared in a more time intensive way, this approach of “hybridizing” financial reports into a financial report + management report is not recommended. Thus, the practice of management reporting separately from financial reporting came about. Management reports use a lot of the same data as financial reports, but presented in a more useful way, for example via interactive management dashboards.

As a Growthforce article states, management reporting helps answer some of the following questions for a CEO:

  • “Am I pricing my jobs right?
  • Who are my most profitable clients?
  • Do I have enough cash to make payroll?
  • Should I hire more employees? If so, how much should I pay them?
  • Where should I spend my marketing dollars?”

In essence, business reporting is a specific form of business intelligence that has been around for a while. However, the use of dashboards, big data, and predictive analytics is changing the face of management reporting.

History and trends of management reporting

In the past, legacy systems were used to prepare management reports – and still are, in many cases. These systems are much more useful than financial reports, but still have their drawbacks. Legacy systems are often quite technical in their operation and interface, which make them challenging for most non-IT personnel to use effectively. This creates a situation of “lag time” between a member of management wanting a report, and actually receiving it.

In modern times, with the breadth and depth of data available growing at an astonishing rate, these challenges have only escalated. As Peter Wollmert, an EY global leader, stated in a quote for a Financial Director article: “Many [CFOs] are encumbered by legacy systems that do not allow reporting teams to extract forward-looking insight from large, fast-changing data sets”.

Additionally, the article reports that a survey conducted by the EY financial accounting and advisory services (FAAS) indicated that ⅔ of CFOs worldwide say that “the increasing volume and pace of data is affecting their ability to provide meaningful insights to boards”. Clearly, modern business dashboards have a lot to offer to management reporting. Let’s dive into the best practices for preparing and presenting them.

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Why Is It Important To Write A Management Report?

For any function and in any industry, reports are more than useful, they are crucial to the well-functioning of the company. Reporting is all the more important in management as it has higher stakes and holds bigger, cross-disciplinary decisions. In general, reports are important to management for various reasons: they measure strategic metrics to assess and monitor the performance, they set benchmark about said performance, enable the business to learn from its activity by leaving a track record, and finally enhances communication. Here’s a short list of their benefits:

  • They measure strategic metrics to assess and monitor the performance: by now, we’ve understood that if businesses wanted to grow, they would need to implement a way to measure their performance against their competitors – but also against their own.
  • They help you understand your position: a management report provides you with the right metrics to get a snapshot of your business’ health and evolution. You can compare it to your competitors to focus or realign your strategy.
  • They set a benchmark about said performance: thanks to that track record, you have a regular benchmark about how you perform both operationally and financially.
  • Learn and reproduce – or not: such benchmark is a guide that tells you what works and what doesn’t. From it, you can learn the best and worst practices to develop or avoid.
  • Enhance communication: among partners, investors, customers, and colleagues. It develops a visibility of the different activities across departments and improves communication within the company.

How To Write A Management Report: 6 Best Practices

1) Set the strategic goals and objectives

For every report that you will write, you will need to start with the end in mind. Why do you need that report in the first place? Do you know the key drivers of your business? How can you tell if your pricing is right? How do you define success? Ask yourself some important data analysis questions that will help you address the needs of the report.

Once you know what you are reporting about and why, it will be much easier to set the performance indicators that will track each specific aspect of the performance. Don’t go further in the reporting process until you have set at least 2 to 3 goals.

2) Pick the right KPIs for your audience

OK – so you know that you need to focus on a small number of KPIs. What KPIs should you be putting in?

It really depends on your audience – both on their job function, and their level of seniority. For example, a junior sales manager and a junior marketing manager are both going to want to see different KPIs. And the junior marketing manager is going to be interested in different data than the head of marketing. A good KPI management is critical in the process of management reporting. A good way to think about the challenge of picking the right metrics is to think: what data-driven questions will the readers of this report want answered? A sales manager might be interested in which of his reps are performing the best, while an inbound marketing manager might want to know which piece of content is performing the best in terms of new email signups. Only after answering this question, you will be able to address your audience’s expectations and benefit from effective reporting. From KPI examples library to our KPI reports article, you can find precious advice on how to pick your KPIs.

Hereafter is a management report example for investors that illustrates this best practice well. It focuses entirely on variables that investors would care about, include the share price and the price to earnings ratio.

Manamgement report for investors focusing on investor-oriented KPIs: Return on Asset, Return on Equity, Debt-Equity ratio, Share Price, P/E ratio, and Working-Capital ratio

** click to enlarge **

3) Tell a story with your data

Our third management reporting best practices zooms out of hard data and figures to focus more on the style and how to present your raw content. Human beings are primarily persuaded through two different types of information: hard data, and stories. When you tell a story using the data on your management report, you can utilize both. This form of storytelling is challenging, but you have a few tools at your disposal and some tips:

  • Using time periods and historical data. Stories follow a beginning, middle, end pattern, and through the use of showing a data trend over time, you can achieve something similar. For example, you could compare revenue in Q1 this year to revenue in Q1 last year.
  • Contrasting different KPIs and metrics against each other. For example, showing a target revenue number vs the actual number this quarter.

Hereafter is a good management report example of storytelling, mainly thanks to the three large historical graphs taking up most of the display:

Financial management report telling a story thanks to historical graphs (revenue, Operational expenses and Earning before interest) that are displayed with additional info on their side (Gross Profit Margin, OPEX ratio, EBIT Margin, Net Profit Margin, ....)

**click to enlarge**

Let’s take a real-world example of how you can selectively use KPIs to tell a specific story: you are the head of marketing and need to justify your current expenditures on content marketing to the CEO. She doesn’t care about email signups or page visits. No, your CEO is interested in one metric – revenue and ROI. It is your job to connect the KPIs you look at to revenue, so that your CEO understands how important funding your department is.

You could show her the following variables to tell a story:

  • Current email list numbers compared to last quarter
  • How many new email list signups you’re currently getting per week on average
  • The average email list signups you got per week last quarter
  • How much money you make, on average, for every new email subscriber and calculate the expected ROI

Using all of this data, you can answer the following question: how much new revenue is being driven by your new content marketing strategy?

This is the kind of story that can make or break funding allocation for a department.

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Follow these 6 questions guiding you to a better management reporting!

4) Make your report visually pleasing through focus

The human mind cannot process too much data at a time without getting overwhelmed. Getting overwhelmed leads to decision fatigue – which makes it harder for your management team to think strategically. That’s why when it comes to management reporting, you should remember the mantra of “less is more”. As a rough rule of thumb, displaying 3-6 KPIs on a report is a good range, and going too much beyond this is not the best idea.

That doesn’t mean that you can’t have other data presented – but you must have a clear hierarchy of visual importance on your report, and only give the most important spots to your KPIs. Other metrics should occupy secondary or tertiary positions. State-of-the-art online dashboard software allow you to easily build interactive dashboards in no time that will become your best asset when you’ll need to convey your information.

The following revenue report is a good management report example of this best practice:

Management report of Revenue and Customer Overview, displaying 4 main KPIs in order of importance and comparing to the previous year, with the purpose of telling a clear story.

** click to enlarge **

The 4 KPIs are prominently displayed:

  • Revenue
  • Number of New Customers
  • Average Revenue per customer
  • Customer Acquisition Cost

These KPIs are set in context with historic trends, targets for the period, or other metrics like Customer Lifetime Value, causing this focused graph tell a story.

5) Make your report very clear

In business writing and in management reporting, clarity is the primary objective. This has several implications for your report design:

  • Follow established dashboard design principles – give plenty of white space, make sure your colors stand out from each other, and select colors carefully.
  • Don’t forget the small things – have a date range displayed next to the data, and make sure it’s clear whether a given KPI is good, bad, or neutral. A good way to do this is by comparing expected values to real ones, like the expected revenue for a quarter to actual revenue of this very quarter.
  • Use common metrics that everyone who will read the report can understand and has experience with using.

For more tips & tricks on data efficient data reporting, you can read one of our previous blog post on how to create data reports people love to read.

6) Go digital!

Your final best practice for management reporting is to ditch the paper-based reports and go digital. Online reporting software are a great asset for your business, as they offer real time updating capabilities, save money and reduce waste. These digital reports can be made to be interactive, allowing you to get more granular or zoom out as you please. What’s more, they are collaborative tools that let your team onboard the analytics train and work conjointly on the same report. Another management reports example we will provide you with is the following marketing KPI report.

This is the perfect type of report a management team needs to make actionable, data-driven decisions: a high-level overview of the marketing performance is given. Indeed, focusing on the click-through rate, the website traffic evolution or page views wouldn’t make sense. On the other hand, the big picture of how the marketing department as a whole works will be more appreciated: total revenue generated standing next to the total spend, the profit that came out of it, the return on investment, etc.

Marketing report for management, with main KPIs about costs and revenue

**click to enlarge**

How To Prepare A Management Report – A Summary

To sum up the main steps we have gone through all along this article, here is a list of the 6 management reporting best practices you can use to prepare a solid management report:

  • Set the strategic goals and objectives: start by defining what you want to achieve, why you need to write that report, and who you are writing it for.
  •  Choose the right KPIs for your audience: different positions have different needs – keep in mind who will read what you write so as to know what you need to focus on.
  • Polish your data storytelling skills. You have hard data in your hands that need to be understood by everyone: clarifying it with a nice story, backed with a comprehensive dashboard will convey your insights even more easily.
  • Make your report visually pleasing through focus: with the help of a BI software, you can build compelling dashboards in no time that will be your best ally when communicating your findings.
  • Clarity is the watchword:  follow some presentation and design principles to stay on the safe side while elaborating your report.
  • Go digital: paper-based reports are of the past. Put your hands on an online dashboard tool that will let you consolidate your data in one central place, quickly and smoothly build interactive reports with always up-to-date information.
Exclusive Bonus Content: Get our free guide to create better reports
Follow these 6 questions guiding you to a better management reporting!

With all of these management reporting best practices, you can now make online reports that will help your company’s leaders to make effective, data driven decisions.

In a nutshell, you can follow the management reporting examples by picking a small number of relevant KPIs to display and telling a clear story with your data. Combine this with the help of an online data analysis tool that will let you work on the evolution of your data in real-time and enable you to create efficient dashboards, and you can bring your business above the competition!

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