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5 Best Practices For Creating Effective Management Reports

working on 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 5 management reporting best practices you can use to make sure your reports are effective. We’ll also examine some management reports examples that illustrate 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 Are Management Reports?

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 BI dashboards have a lot to offer to management reporting. Let’s dive into the best practices for preparing and presenting them.

Five Management Reporting Best Practices Leading You To Accurate And Data-Driven Decisions

1) 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 Key Performance Indicators (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. The following revenue report is a good management report example of this best practice:

Online report of Revenue and Customer Overview, displaying 4 main KPIs in order of importance and compare to previous year, with the purpose of telling a clear story. Revenue, Number of new customers, Average revenue per customer, and Customer Acquisition Cost (CAC) with CAC vs. Customer Lifetime Value (CLV)

** 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.

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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 way to think about the challenge of picking the right KPIs 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 answer this question, you will be able to address your audience’s expectations and benefit from effektive KPI reporting.

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 KPIs investor-oriented: 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

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 (revenie, Operational expenses and Earning before interest) that are displayed so as to be the most important graphs, 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.

4) 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 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 posts: How to Build Interesting Data Reports People Love to Read.

5) Go digital!

Your final best practice for management reporting is to ditch the paper based reports and go digital. Online reporting tools are a great asset for your business, as they offer real time updating capabilities, save money and reduce waste. Additionally, these digital reports can be made to be interactive, allowing you to get more granular or zoom out as you please.

Exclusive Bonus Content: Get our free guide to create better reports
Follow these 6 questions guiding you to 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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