Those of us who are “numbers” people are blessed with being comfortable working with and interpreting numbers. This is not always the case with those folks who are more right brained and tend to be challenged when it comes to looking at numbers.
The first thing to know about numbers is that numbers by themselves have no meaning. The meaning is determined by how the reader relates this number to something of value. Value does not always mean dollars, value could be in seeing a trend, or measuring performance or output against a standard. So a “numbers” person derives value, or power, in the numbers as a result of comparing it to an expected result or relationship to other numbers such as past performance.
We all have heard the phrase “what gets measured gets managed”. This adage speaks to the power of numbers and reinforces the notion that if you want something to change, you need the ability to measure change.
A number of units sold each day has value, but it gains value when compared against a target or budget and gains even more value when compared to last year or a prior period. In this example you see how one number, when surrounded by the right comparable numbers can provide a reader with a more robust perspective.
CFO’s learn through years of experience that even if you have the right information, if it’s not in a meaningful format there is no value. We hear over and over again from CEO’s and Owners the financial information they receive provides them little or no value besides top and bottom line. When you look at their reports, the reason is obvious because it’s not formatted in a way that allows the reader to see comparisons, measure trends and determine important relationships.
Here are some key points to remember when formatting reports:
- Know your reader – put yourself it their shoes and ask yourself, what would be important to see if you were in their seat.
- Make comparisons – make sure you have a comparison to a target, goal or last year’s performance.
- Include percentages – having a percentage ratio is especially important when looking a gross margins and other costs as they relate to various sales volumes.
- All on one page – have all relevant data calculated and on one page so there is no flipping back and forth or number crunching.
The ultimate goal of a good report is to provide the reader with clarity, conciseness, insight and a meaningful presentation. Hopefully these suggestions will help numbers people format reports in a way that helps the right brained people get more value and understanding from them. . . and make better decisions.
Subscribe to our blog for more practical, small-business financial tips.
For more information please contact us at info@michiganCFO.com.