A mass of reports with a great variety of methods to represent operating figures, graphical items, messages and the like: this is a growing and intensely discussed set of problems in scores of companies. This results mainly from two factors. First, you can determine an increasing demand for information by a heterogeneous group of both internal and external recipients. Second, report generation is often not a centralized issue, but is in the hands of decentralized subsidiaries or different departments of a company.
Implementing uniform, company-wide notation standards for reporting might be a possible way out of this dilemma. Needless to say, such guidelines are a hotly debated topic currently—triggered, for instance, by missing transparency and an inadequate comparison of the reports.
Breaking old habits and leaving familiar paths
The aim of simplification and standardization of a reporting system is often closely connected with the necessity of breaking with traditions and well-known, habitual procedures. Reporting structures and principles that have grown over the last couple of years or even decades normally cannot be turned around completely or adopted just in parts without facing some kind of internal opposition to those changes.
Therefore, standardization intentions need to go along with continuous and solid efforts at persuasion about the benefits of such an adaption—persuading both report creators and recipients. In general, notation guidelines concerning reports can be especially valuable because of the following advantages:
- Improved readability of reports and much smaller wiggle room by using binding and recurring reporting structures and items
- Specifically highlighted (key) messages that facilitate the understanding of correlations faster and better, as well as speed up decisions eventually
- More effective and efficient creation of reports based on templates and guidelines
- Optimized possibilities regarding the report’s comparison with historical and actual data included in other reports (benchmarking, variance analysis)
At first glance, several notation rules being presented below may seem directly plausible, not to say trivial. Nevertheless, getting over individual preferences of both report creators and information recipients can prove to be quite challenging—abstracting away from rationality and good arguments. As experience shows, even the outward appearance of reports (e.g., usage of colors and fonts) might be a trigger for hot-tempered discussions among project staff, not to speak of, for instance, different views regarding appropriate reporting contents (structuring, key figures, and so on).
Standardization of reports: 5 notable notation rules
Rule #1 // Just say it: Transmitting understandable messages
Implicit as well as explicit messages are the core essence of every report. However, transmitting them to the recipients is not always easy.
Report statements (or information or data in general) need to be comprehensible, reduced to the essential, and specific to the target group. In other words, it has to give the gist of the matter to readers and consider their information needs (e.g. providing specific management ratios, representing particular temporal dimensions).
Rule #2 // Simplification makes life easier: Avoiding complexity
This notation rule primarily aims at boosting the readability of business reports. Lots of report items, like charts, diagrams or tables, are often crowded out by unnecessarily detailed information, diluting the reports’ main points and key data.
Besides, reports are often lacking in comments on technical terms or an explanation of operating figures’ meanings. This makes it especially difficult for readers who are not “data enthusiasts” and do not have an economics background to understand the correlations and interdependencies among the report’s contents and the immediate needs for action.
A small tip: Instead of tables or running text, it might be better to focus the representation of the report on clearly structured graphic charts and diagrams.
Rule #3 // Less variety: Using standardized report items
It is quite common in daily business life for reports to be created by different persons, departments or even subsidiaries—all of them with dissimilar preferences, for instance, regarding the reports’ appearances and layouts. However, standardized reports give their readers faster and improved understanding of its main facts. So, the report creators should put their individual likes and dislikes in the background.
Therefore, standards in layout usually comprise the following subitems: uniform cover sheet, formally consistent report structure, corresponding use of fonts and markings, analog graphical presentation of (key) figures and certain variations, no usage of coloring without a clearly defined meaning, and so on.
Rule #4 // Information overload can be cured: Condensing reports
Fulfilling any possible need for information already in advance should not be the self-imposed claim of a reporting system. Instead, targeting relevant recipients and knowing their differing requirements concerning the depth and form of information should be the top priority.
Creating reports for the highest number of readers, and filling them with all available information (thanks to data warehouses and business intelligence), will only result in a heavy and unnecessary workload for the report creators. Besides, the recipients won’t be motivated much to read through bulky and time-consuming reports with—at least for their individual needs—partly irrelevant as well as bloated data and key figures.
A clearly defined reporting strategy (“what is reported and how often?”, “who reports to whom?” and so on) avoids such a mess, and respectively the risk of information overload for the readers.
Rule #5 // Don’t trust blindly: Ensuring accuracy and quality
This is not a notation rule directly; nevertheless, it is still essential to guarantee reliable information as well as a proper visualization of operating figures in tables, diagrams and charts every time—especially considering the mass of relevant and less relevant data available. This also includes, for instance, qualified and uniform concepts for scaling differently measured variables.
Finally, all individually specified notation guidelines should be rolled out company-wide at every enterprise level, in the form of a generally binding notation guide. However, while trying to implement such a standardization project in your company, you have to consider sustainably. That is, it cannot be successfully performed without facing some internal resistance. As already mentioned, this means that the project initiators need to confront these reservations actively, open-mindedly and also quite sympathetically.
At a later stage and in a separate post, we will examine in more detail the question of how to initiate such a notation project internally and how to implement those changes promisingly.
About this blog
Must-read blog posts about management accounting and financial control—classical topics, as well as modern subjects, latest trends, and current challenges in the management accounting discipline. Aimed to inform, inspire, and entertain management accountants and anyone with a deeper interest in management accounting.