3 questions to answer before report design

When finance is asked to prepare a new report or redesign an existing report (financial statements, budget book, quarterly forecast, MD&A, etc) the decisions made can dramatically impact understanding.  

In our experience, formally dealing with these decisions (the design stage) is rare. As we have discussed in Style & Substance before, there seems to be little formal direction on how to design reports. Combine this lack of direction with an abbreviated, overlooked design process, and you run the risk of having some fundamentally flawed reports; reports that confuse, distract and obfuscate the data. 

When tackling a new report or re-developing an old one, these three questions need to be asked during the design phase:

• Who will use the report,
• What must be reported, and
• How should it be presented

Question 1 - "Who"

Knowing who the likely user of the report is, should make a critical difference in report design decisions. For example, if the likely user is the senior management team, perhaps very general introductions and explanations are unnecessary as you can be certain they have great knowledge about the organization.  

On the other hand, if the users are likely to be non-finance experts, new to the organization (newly elected council members for example), or external to the organization, then the use of jargon or omitting general introductions or explanations may well be unwise.

Are the users technologically adept? If so, providing the report electronically may be the best option. Electronic distribution is especially powerful if the board/council will want to make & share notes, and create action items based on the report. 

On the other hand, if the user is not comfortable with technology, a well crafted, printed document is likely a superior choice.  Why does technology matter when designing a new report? If the destination is paper & ink, then you are bound to designing a report to fit on 8.5" x 11" paper, printed in portrait orientation. If the ultimate destination is an iPad or a computer screen, you may be able to abandon these constraints. 

Question 2 - "What"

The first, most fundamental "What" question is "What answers are readers trying to get with this report?" This is an absolute prerequisite before creating the report. 

Consider some examples - If finance is reasonably confident that users of the report are looking to understand profitability, they will tailor the "What" to show the variables that are most explicitly tied to profit. In many cases, this is where finance's expertise comes in. Likely their experience means they have a very clear understanding of the relationships that affect profit. Now is finance's opportunity to leverage the report to communicate their knowledge to the user(s) of the report. 

If you are in the automotive sales industry, you might know that region, and product category most directly affects profit. You would then omit or summarize data if it confused the topic. Thus the design must allow the user to see the relationship clearly.

Do they need to know how much budget is available for a specific department, fund or program? If so, this information should be displayed with priority.

Too often reports are generated without first establishing very clearly what answers the user needs. If this failure occurs, end users of the report are often left to dump a report out to Excel to manipulate the data to find the answers they seek themselves. 

The next step in report design is asking, "What data should be included in this report to answer the readers' questions?" In our experience, these sorts of questions are fairly straightforward and easily answered by the finance team. Examples include:

1. What type of data should be presented?
   1. Actuals, Budget, Forecast or all three?
   2. Revenues, Expenses, Operating, Capital
2. What date range will this report cover?
   1. Current Year to Date, Current Period, Prior Year(s)
3. What level of detail must be presented?
   1. Individual GL accounts? Or should the accounts be grouped on some basis?

Question 3 - "How"

For finance professionals, the "How" can be more challenging. This is because formal training on how to present the data and how presentation choices can affect interpretation is not commonplace. Consequently the answer to "How?" is often "Let's throw the data in a table with several columns and rows. That'll satisfy them!"

As a means of helping our would-be report creators, here are some guideposts (at a high level) for how best to present our data. There are 3 different devices we might use to communicate our message:

• Tables: A table encodes quantitative data as text. Table are the right choice when:
  • the exact value is important. For example, budget officers might need to know that Public Works is precisely $101,985 over budget.
  • comparison of exact values is important.
  • there are multiple units of measure to be displayed together. For example, the quantity of 911 calls, dollars of expense for the Policing department and variance against budget as a percentage. 

• Graphs: A graph encodes quantitative data visually. They are best used when:
  • the message you wish to communicate is best understood in patterns, relationships among and between quantitative values & exceptions. 
  • there is no need for precise numbers or to compare individual values. For example, budget officers only need to know that Public Works is approximately $100k over budget.
  • there is a need to show much more complex relationships.
  • vary large data sets must be presented.

• Narrative/Text: Complements graphs and tables. Consider using narrative text to:
  
  • Introduce a topic, a problem, a business process or other item the reader might not be fully conversant on. 
  • Explain the graph or the table so the reader does not miss any nuances.
  • Highlight or calling out a particular point in a table or graph.
  • Label a particular data point in a graph, or columns or rows in a table.
  • Recommend appropriate next steps or actions.