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April 11, 2019

3 Tips To Improve Your Financial Reporting



When most people look at graphs, charts, and columns full of numbers, their eyes glaze over and they fail to learn or retain anything. This isn’t good for someone who is in charge of developing and sharing financial reports. By improving the way you approach financial reporting, you can flip the script and have a bigger impact.

Three Steps to Better Financial Reporting

Whether you’re an investment advisor delivering a year-end report to a client, or a CPA in a major corporation who is responsible for generating weekly reports to keep company leaders abreast of the company’s fiscal health, being able to create, deliver, and explain complex financial reports is a major part of your job. If you don’t do it well, you’ll fail to convey value and could even compromise your future. 

In one sense, financial reporting is easier than ever. You have access to more data than people could have dreamt of 20 years ago. Yet, with this data, it’s easy to become overwhelmed and bogged down. To generate meaningful financial reports that satisfy the intended user and set them up for success, you need to adopt a purposeful approach. If nothing else, you should focus on three key elements.

1. Accuracy

Accuracy is the number one key to successful financial reporting. If a report isn’t accurate, it’s useless and invalid. If nothing else, focus on ensuring any report you deliver is truthful and transparent.

Most people will agree that it’s ethical to use real numbers and honest data – that’s not usually up for debate. It’s the gray area of accuracy that’s a struggle. 

For example, an investment advisor may be tempted to leave out a couple of metrics that make him look bad, while including a few that shine a more positive light on his performance. While he’s technically using accurate data in his reporting, he’s fudging the presentation of these numbers to communicate a certain result that isn’t completely indicative of reality. Most would agree that this is unethical and, therefore, inaccurate.

Accuracy means telling the truth and framing a report so that the recipient can draw clear conclusions of the actual state of things.

2. Simplicity

When a person picks up a financial report, they search for signals that help them find some bit of understanding amidst a sea of numbers and figures. If the search for understanding takes too long, they become intimidated and skeptical – two words you don’t want to describe your audience.

The biggest challenge you face in developing financial reports is delivering the right message, while still keeping things simple. With so much information available at our fingertips, you have to determine what matters and what doesn’t.

It’s often the case that 20% of your data items provide 80% of the relevant data you have,” Mandel explains. “Consider showing only that top 20% of the items. Then, consolidate the remaining lines into a line called ‘Other.’”

Simplifying your messaging doesn’t mean compromising the message. In most cases, you can streamline reporting without taking away from the integrity of what’s being communicated. It’ll take some work to figure out how you do this, but then again, that’s what you’re getting paid to do.

3. Brevity

Finally, reports should be concise. Brevity is often overlooked, but it’s arguably one of the most important aspects of financial reporting. By delivering a report that’s straight to the point, you eliminate the risk of confusion and give the recipient the chance to focus on the takeaways that truly matter.

If possible, always try to keep a financial report to a single page. If one page won’t do, then aim for two pages (and so on). The tighter you can make the report, the more engaged people will feel. Don’t beef up a report for the sake of coming across as more prepared. It actually takes more skill to deliver a concise report that’s accurate and simple.

Improve Your Reporting Skills

Financial reporting isn’t easy, but it doesn’t have to be as impossible as some make it out to be. By focusing on accuracy, simplicity, and brevity, you can develop solid financial reporting skills that yield value for everyone. 

As fast as this industry evolves and iterates, be sure to stay up to date with the latest technology and best practices. In doing so, you’ll be capable of adapting your reporting skills to account for new trends and satisfy the individuals on the receiving end. 

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.
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