When it comes to make a financial reporting, you cannot improvise. There are some rules to repeat and tricks to know to pull through. Let’s see how you can make a good financial dashboard!
Financial reporting is crucial because it allows companies – from the medium-sized ones to the multinationals – to based the steering of the activity on key indicators. Furthermore, the International Financial Reporting Standards, IFRS, requires a general presentation of financial status in addition to changes in accounting methods.
Today, communication is fragmented in almost all the companies: financial communication for the investors, the inclusion of new accounting methods, supervision of management functions, accounting, and finance… You can get lost.
More and more financial boards are thinking about creating a unified reporting, and financial reporting has become the principal tool for decision making.
Here are some key rules to know if you want to master financial reporting.
#1. Understanding properly user’s needs beforehand
Before you start, ask yourself about the nature of your company, the market into which is it developing and about the final user’s needs. If you want to be able to set up scenarios with the data you collected – which is essential to create your financial reporting
– you have to know the context and the use. Each company and financial function has a specific use of its data.
To focus on the different professions allows you to identify the most important data: main sources of income of the company – by product, area, distribution channel… – main sources of costs – the value or percentage of fixed costs, variable costs … – key resources of the company.
There is no fixed pattern to make a financial dashboard. Each department, profession, and industry has its own codes and this plurality requires a high level of personalization.
#2. A financial reporting should not be exhaustive
When you build a financial dashboard, the main risk is to get drowned in a sea of data. A first way to avoid that is to focus on the information available at the moment you do the job.
The second way is to prioritize your KPIs. There is one rule to respect: go straight to the essential. Do not forget that a dashboard has two functions: help decision-making and communication to your managers or your team. We know that it can look counter-intuitive.
Indeed, people who build reportings are always scared to miss crucial information. However, nobody wants, neither can follow his company’s activity by taking 20 factors into account.
Leonard de Vinci said: Simplicity is the ultimate form of sophistication. A clear view allows the audience to focus on data more than on the understanding of a slideshow. The keys for a good presentation are a strong message, contextualization, and significative data.
#3. Pick up significative performance indicators
What is your goal when you make financial reporting? Is it to support the management of a specific project, to provide an analytic view on the company’s activity or just to have an overview of the main financial indicators at a precise moment?
New technologies of Data Visualization give the opportunity to generate graphics and interactive dashboards with entertaining designs. Dataviz enables you to browse easily from a piece of information to another while processing huge databases.
During a presentation, the goal is not just to read your results, it is to give an overview of your activity and make your audience understand the causes of a precise fluctuation. For that, you have to build things in a pedagogic way and contextualize data. It is called data storytelling.
Each KPI tells a story about the company’s activity. HR data can explain staff evolutions, financial data helps understanding statements… The thing is that each piece of data holds a message that has to be understood. Confucius said: an image worth a thousand words. Each graphic must hold a clear message to help the understanding of complicated information.
#4. A dashboard is an evolutive tool
Your financial reporting is not an end in itself. Consider it as a step in your decision-making process. Thus, it is absolutely necessary to update it periodically.
That will enable decision-makers to synchronize decision cycles with the release of reporting – making dashboards real piloting tools for the company’s performance.
Your environment, projects, goals, and constraints are changing. Good reporting sustain those changes or even direct them. Thus, you should always make sure that your dashboard is made with indicators that correspond to your needs and that push your team to act. An indicator that triggers no action in case of sudden change is not a good one.
#5. One indicator by screen
Tired not to understand other people’s boards? Do not make the same mistakes.
The easier data are to read, the faster they will be understood, and decision-making will thus be facilitated. Furthermore, people are not always familiar with the format you use and it is crucial to make information accessible.
A graphic must hold only one message. Dashboards are presenting dozens of indicators and graphics too often, and that confuses the audience. Do not overload your graphics. It is more impactful to present an idea with one visualization on one screen. Then, present your ideas on distinct slides.
You have now understood that building a financial reporting does not mean compressing the more technical information you can on the shorter support you can find. Building a financial dashboard means making that information comprehensible for everyone.
Pick the most relevant information and try to see them through the eyes of your audience. Your dashboard has to be meaningful without any explanation. If you can send it to your recipient without any commentary, it means that you did it well!
Baptiste Jourdan, co-founder of Toucan Toco.
Since 2014 Toucan Toco helps managers to make a decision in a much faster and more efficient way thanks to data visualization available on any portable device -iOS, Android-like tablet, and smartphone but also on PC and Mac.