Read our round-up of best practice Hints and Tips for preparing and presenting Management Information.
Whilst there can be a temptation to run away with a variety of information, there should always be a place for core management schedules at the forefront of the MI. A P&L showing (1) ‘Actual vs PYr/Bud’ for the month and YTD, and (2) ‘Forecast vs PYr/Bud’ for the full year must be front and centre with no over complication. Management have spent their career with these types of reports coming across their desk, so have muscle memory in consuming the messages.
A monthly pack needs to highlight new news. There is clearly a place for replaying those things which are already known, but not at the expense of hiding new developments. For instance, if a particular cost line is known to be running above budget for the YTD, and the reason for this is understood, then there isn’t necessarily merit in continuing to focus narrative on this issue if this means that other, more recent trends are lost.
The MI needs to help identify the upstream cause of performance and often this involves collecting data which is not in the finance systems. In other cases, it may simply require correlated metrics to be presented together. Ultimately, the aim is to understand – for instance – not just that a cost is above budget, but instead if it is due to a greater consumption than anticipated or more of a unit cost issue, or if it is driven by increased business volumes, or a timing consideration etc. Having users tag/categorise variances can support this sort of analysis.
Simple charts can strongly amplify a message, particularly in drawing out trends which are less apparent in the data. On the flip side, overly complex charts can be a distraction, and as such, we recommend sticking to simple standard charts. A simple test should always be ‘can the user tell what the chart is trying to present to them if they look at it for less than ten seconds?’
The core financials will give a view of ‘what has happened’, and there is clear merit in understanding that position. However, the real benefit of the MI should be to understand what that means for future performance, year-end out turn etc. Some of this will be driven by primary forecasting activity where the business is actively reviewing assumptions, buying into a forecast etc. Additionally, it can be supported by simple modelling, using techniques such as run rate projections.
Taking GL data, aggregating it and presenting it only gets you so far. Usually there is an opportunity to enhance the data by using the modelling/calculation capabilities. This may be by processing recharges and/or allocations, by mapping data to produce alternative roll-ups and views or by managing exchange rates so that the impact of currency movements on variances is clear. Invariably, this needs not only the calculation engine, but also user inputs to control the calculation behaviours.
In the spirit of continual improvement, and ever better forecasting and predictability, an MI pack should include a view on forecast accuracy. This needn’t be ‘naming and shaming’, but should be granular enough to understand which areas of the forecast are more or less accurate. This can be particularly important when dealing with driver-based forecasting, as it can help understand where the forecast approach needs recalibration, alternative drivers identified etc.
The strongest message in MI is often in the trends, and simple line and bar charting of these is highly effective. In particular, using techniques such as rolling 12-month averages allows a focus on the underlying trend rather than the monthly fluctuations. Sharp turns in direction in a forecast rolling average can be suspicious.
Notwithstanding that there is always a need for a YTD/FY view, we recommend that there is also content to capture a rolling view. This can often just be ensuring that a ‘last 12 months’ / ‘next 12 months’ view is available.
Too often commentary can just be a repeat in words of what the data shows, i.e. ‘costs for the YTD are £0.2mn above budget’, which does not add much value. Commentary should focus instead on the why as well as what can done about it? Commentary should have that ‘call-to-action’ feeling to it.
Broadly speaking, there are three options for delivering reports to users, namely (1) direct access through Anaplan, (2) preparation of traditional Excel/PowerPoint based packs, and (3) integration with a Business Intelligence tool. It may be that some of the user community uses Anaplan to ‘self-serve’ access to data as well as navigate around this data etc. However, when it comes to senior management/executive reporting, PowerPoint often remains the most effective delivery mechanism. The implication of this is that there will still be effort within Finance to prepare these packs. However, the upside should be in ensuring that Anaplan does the heavy lifting on preparing the data, without too much Excel manipulation and manual steps.
A project team building dashboards and reports can often get very close to the detail. In doing so, complex dashboards can be created whereby every element is very well thought out and understood, but by people who have lived and breathed the content. Stepping back and thinking ‘will the end user know the purpose of each component?’ is important to avoid the trap.