Having looked at a fair old number of Management Information
("MI") systems and monthly reporting formats, what
strikes me is that some of the prettiest, most eye catching and
most clearly laid out are often the most ineffective. We all love a
graph and there is nothing more pleasing than a multi-coloured
pie-chart, but are these displays of wizardry actually useful? Most
are not, for one simple reason: these reporting formats lack a key
ingredient – they do not produce "calls to
Only rarely do we see a commentary attached to the numbers and
this is vital.
If sales have risen month on month by
20%, is that good news? Well, not if all they are doing is
returning to trend and not if the business is cyclical and monthly
sales are actually 15% down on the same month last year.
Sales are 5% down on budget, so
that's bad news? Well, no, it isn't if they were 20% up on
this time last year and the budget was simply unrealistic.
Unless someone has gone through the figures and really put the
results in context, then there is little point in looking at the
numbers. And by the way, if the commentary reads "Turnover is
up because sales increased" then fire the person who wrote it
and replace them with someone more intelligent.
Good MI needs to be timely. That does not just mean monthly
rather than quarterly. It means they must be delivered quickly
after the period end and also at a frequency that actually allows
you to take action, to learn from the results and improve things.
If you run a people-based business that bills out their time, then
run productivity reports for hours worked on a weekly or even a
daily basis. Such "flash reports" will allow you to take
action before the end of the month to claw back a shortfall if you
start falling behind. They should be simple and quick to put
together and then studied so that problems and blockages can be
dealt with immediately. They can often contain rough estimates (no
prize for accuracy here!) produced within 48 hours of the month end
and therefore able to foreshadow the main P&L account reports
which come out 20 days later. Of course the logical extension of
timely reporting is to deliver a continuous flow of data in
real-time. Nevertheless the latest cloud-based systems still can
fall into the trap of delivering too much information in a format
that does not lead to better management.
Doing your homework
High value MI reports are those which are produced with absolute
regularity and delivered to participants at least 48 hours before
the meeting at which they are discussed. I have attended too many
meetings when reports are read at the meeting for the first time
and the allotted time is spent merely explaining the information.
That process should have taken place already. The precious time
during which key people have got together can then be devoted to
discussing solutions that were prompted by the calls to action
listed in the narrative of the MI.
The other hallmark of excellent MI is the dashboard –
constructed with KPIs1 that allow the reader at a glance to
understand whether the business model is functioning at an optimal
level and the machine is running "in balance" and that it
is giving the customers what they want. Traffic light systems are
also an excellent technique for business owners that can spare only
a cursory glance at the reports – if all the KPIs are green,
there is no need to fix anything. If green changes to amber then
that has to be accompanied by a concise assessment of any pending
risk and the consequence of not returning to green. Red will demand
the team's urgent attention.
And one further plea, as an accountant! Never look at a P&L
account or a cash flow forecast unless it is accompanied by a
balance sheet that ties the two together.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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