How to Mitigate Two Management Reporting Pitfalls
Management or internal, reporting is one of the most fundamental pillars of any strong finance function. Useful and reliable management reporting contributes to timely and accurate decision making and can encompass both financial and non-financial information. That being said, there are two common pitfalls I have seen time and time again with respect to management reporting:
- Data/information overload- The tendency as any reporting framework evolves is for it, and most importantly it’s deliverable outputs, to grow. More detail, greater depth, more information, etc. This growth is usually driven by good intentions – aiming to provide more to stakeholders and users of the information. The pitfall is providing too much, or providing less relevant/important information and actually removing emphasis and focus from the more relevant/important information. The solution: always critically evaluate the relevancy of any reporting, and focus on the needs of your users. Incorporating more information can be very valuable, but the role of management reporting is to present that information in the most effective way possible.
- Constant change- Improving reporting, whether it be the content or look and feel of the presentation, is also a natural tendency. The pitfall here is that by constantly changing a report, even with minor tweaks, you may be forcing your user to “re-learn” the report, which distracts the user from the primary objective of receiving relevant information. The solution: constant improvement is never a bad thing, but avoid making constant changes. Rather, park your proposed changes initially and introduce them all together on a less frequent basis. Assuming they are productive changes, in the long run, your user will appreciate them, but will also appreciate minimizing the frequency of having to navigate those changes.
Recognizing and mitigating the two pitfalls I have described above is an effective way to ensure that your management reporting stays relevant and accomplishes its primary objective of facilitating decision making.
This blog was written by Aaron Merkle, Controller at Trindent Consulting. With over ten years of experience in public accounting and corporate finance, Aaron Merkle is responsible for the overall financial management of the firm.