Delivering a Better Report

Delivering a Better Report

Delivering an effective narrative report can be a challenge. It requires a clear vision of what’s needed to tell the company’s story. Getting the right people involved behind a common objective for the report is essential. Successful teams typically combine an in-depth understanding of business operations and strategy with a strong reporting background, and an empathy for investor needs.

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Senior Manager, Better Business Reporting

KPMG in the UK

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We look at how to develop your report to tell your business story, and how to put the process behind this to deliver lasting reporting benefits.

Quality assurance (diagram)

The right people & process

A business model based approach to report drafting should be far more natural for report preparers but it may require a change in reporting culture.

A ‘big-picture’ perspective will need to be introduced into report preparation processes that have traditionally been subdivided into specialist areas. Getting the right reporting team with the right objectives and leadership backing is therefore the starting point for an effective report. Unless these contributors start with a common vision, and work to bring their individual reporting strands together into a coherent whole, reports can become a series of disconnected issues.

Key questions to ask:

  • Do we have the right people from across the business, working to a common reporting goal?
  • Do we have a realistic timeline and objectives for developing the report and reporting systems?

The right content

Report preparers are naturally wary of reporting initiatives. They can easily turn into a series of additive disclosures that do little more than add bulk to the report. Ad hoc improvements to narrative reporting are no different. The danger is that a great deal of effort can be spent on content that is simply not relevant to the reader.

The answer lies in staying focused on what’s really important to the business. Often there will be five or six key matters that really drive the long term prospects of the business. A narrative report that focuses on these key matters should be of much greater value than one that picks out a myriad of disconnected issues – and it may well be more concise.

If the business model and strategy provide a foundation for the report, linkage or ‘connectivity’ provides a basis for developing a coherent story of the business. Business-centric reporting frameworks work by developing this story across a series of content elements. For example if the business model highlights dependence on a critical distribution network, a discussion of the business environment should address factors affecting this network, and performance reporting should show whether the size and health of the network has been enhanced.

Key questions to ask:

  • Does the report focus on what’s really important to the medium and long term future success of the business?
  • Have the implications of matters raised in one section of the report been followed-through in the rest of the report?

The right information

If the issues that the report needs to address should be defined by the business model, the information needed to explain their implications should be defined by the needs of the audience (generally investors for an annual report). Reports prepared without an understanding of the reader’s needs may address the right issues but are unlikely to provide information that is relevant to the reader’s decision making. For example, many business strategies are centred on developing a particular aspect of the customer base but performance measures are rarely segmented in this way, even though that is what a reader would need as a basis for assessing the potential earnings impact of the strategy.

It may be tempting to approach this challenge by imposing a system of high-level metrics to measure the business against. But, the more relevant challenge lies in finding the right question to answer. For example, a number of reports now provide information on staff retention, but few answer the question: ‘is the business retaining its most important staff?’ How these questions are answered will depend upon the unique circumstances of your business.

Key questions to ask:

  • Is sufficient detail provided for readers to understand the business implications of matters raised?
  • Does the data included in the report answer the right questions – will it help reader’s make more informed decisions?

The right systems

Businesses have well-established processes to support their financial reporting. As the balance of report content shifts to incorporate operational matters alongside this, greater focus may be needed on non-financial reporting systems. Much of this information may come from established systems that are already being used to run the business. But the demands of external reporting can be different. It is therefore important to assess the origin and integrity of non-financial data sources for the report, and adapt systems and processes accordingly. Non-financial performance data can be amongst the most price-sensitive information for investors – the rigour behind it should reflect this.

Key questions to ask:

  • Do the underlying systems provide the Board with sufficient confidence over non-financial information being reported?
  • Is the process for extracting non-financial data from the business’s underlying systems effective?
Expect the journey to a better report to be evolutionary as non-financial reporting systems are developed to support the report. This type of information may be just as price-sensitive if not more so than the financials - a similar approach to quality is required.

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