The Beginner’s Guide to Creating Effective Business Reports

As a freelancer, small business owner, or entrepreneur, you’re making important business decisions every week. You need to decide when to make a new hire, whether to change the pricing of your services, how to enhance your website, and where to invest next.

To make good decisions, you need the right information, presented in the right way, at the right time. In short, you need good reporting.

”Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it." — H. James Harrington

What Exactly Is a Report?

A report collects together important information, makes it easy to understand, and lets you make informed business decisions based on that information.

Don’t switch off or change the page. I’m here to let you know why reporting is important, how to create useful reports, and what you should be using them for. By the time I’m done, you’ll be a reporting maven, able to get at the information you need, see how your business is doing, and make decisions that directly contribute to your business's success. Really.

I know, because I’ve seen how great reports can help to transform a business. As a (former) reporting manager and now a freelance writer and small business owner, I’ve analyzed data and written reports, used them to get decisions from executives, and changed the direction of my own business. It’s not always an easy ride, and one of the more difficult areas is persuading others why reporting is important.

That’s why we’re going to deal with some common misperceptions about reports.

"I Think Reports Are Boring”

I hear you. It’s true that reports can often become wallpaper — pages and pages filled with figures, trendlines, pie charts, and more — decorating a manager’s wall. People put hours into creating these monstrosities, only to have them looked at once and consigned to the wastebasket of "meh."

It doesn’t have to be this way. I’m not going to say a report will create an adrenaline rush, but when you focus on what really matters (success), that report is going to help you make the right decisions to grow your business, serve your customers, and put money in the bank.

In other words, while many reports are background noise, the ones you’re going to create will empower you to do the right thing.

"I like to Make Decisions Based on My Gut Feelings"

We all do. And it’s true, sometimes gut feeling is the way to go — sometimes, though, it’s not. There have been plenty of decisions made purely on gut feeling that have caused businesses to fail. An idea at the wrong time, a belief in a market that wasn’t there, developing the wrong products and services.

Gut feelings do have a place in decision making, but in the right context. In fact, gut feelings often come from our experiences, based on the information we see every day. Our brain takes that information, processes it and creates a "baseline" that we subconsciously judge things against. When you’re acting on gut feeling, you’re really using a combination of experience, information, and opinions to arrive at your decision.

Reporting is a way of putting some discipline around that process. A good report gives you the latest information, unfiltered by anything else, that lets you make an informed choice. The best decisions are guided by information and intuition, and reporting influences both of those areas.

"I Don’t Have Time to Create Reports"

So you don’t have the time to help your business be more successful? If you genuinely don’t think you have the time, consider this — reporting lets you:

• See how your business is doing on a day to day basis.
• Get an early warning on things that are going wrong.
• See where you’re spending money.
• Understand how your business is growing (or not).
• And much more.

All of these areas are essential to being successful, and with reporting becoming faster and easier, some effort now will pay dividends in future.

Why do reports matter? To sum it all up:You need reports so you can make better business decisions.

Why Reports Become Wallpaper

Let’s not fool ourselves. Reports aren’t a universal panacea that will solve all business problems. Before we start looking at what makes a good report, let’s explore the reasons people dislike reports. The traits of bad reports include:

• Presenting raw data "as is" without giving context.
• Providing way too much data.
• Being overly long.
• Not allowing you to see at a glance what you need to do.
• Using charts and graphs with little regard for what they’re showing.
• Providing historic trends over the wrong period of time.

Bad reports actually obscure the data you need and make it harder to take good decisions. That’s why they often become wallpaper.

Here’s an example — When I was running our reporting area, we produced around 20 different reports a month that we sent out to various execs and managers. We didn’t get much feedback on the reports, even after we asked for it repeatedly. So, I tried an experiment.

Every month, we produced the reports but we reduced the number we sent out by five a month, without telling anyone. No-one noticed until the last month, when we started getting enquiries. The result? We reduced our monthly reporting from 20 reports down to just 4, and then we made those reports amazing.

You Need to Follow These Ground Rules

Decent reporting needs the right approach. It means changing your thinking about what reports can do, how they do it, and why you need the information in the first place. These common sense best practices will give you a strong foundation. They are:

• Design reports around your decisions, not the other way around.
• Make sure you can act on the information in a report.
• Keep information in reports to a realistic minimum.
• Use high-quality data.
• Present information in the right way.
• Don’t try to make one report do everything.
• Decide how frequently you’re going to report.

Design reports based on the decisions you need to make

There’s a temptation to include something in a report "just because." In fact, people often create whole reports “just because.” Unsurprisingly, these reports go straight in the trash can. That’s why the best way to create a decent report is to ask this question:

What are the most important regular decisions I need to make in my business?

Once you’ve answered the question, design reports that give you the information to help make those decisions. In other words, base the reporting on your business needs. Just this one, simple rule by itself would rid the world of so many bad reports! A report should be designed to give you insight into specific areas of your business.

”If a measurement matters at all, it is because it must have some conceivable effect on decisions and behaviour. If we can't identify a decision that could be affected by a proposed measurement and how it could change those decisions, then the measurement simply has no value" — Douglas W. Hubbard

Make sure you can act on the information in your reports

What’s more informative?

• Number of incidents in March: 28, April: 33
• April saw an 18% rise in customer incidents

The second bullet is actually something that catches your eye and makes you think "I need to do something about that." This is known as having actionable information, rather than just raw data. In other words, it’s not just numbers, it’s how those numbers are presented that makes you take notice.

Anyone reading through a list of numbers knows how quickly number-blindness and boredom sets in. Avoid that by reporting on the stuff that really matters, and presenting it in a way that makes sense. This often involves making comparisons and showing how things are changing.

Keep the information in your reports to a workable minimum

One of the main mistakes people make with reports is including way too much data, when you only need to see the stuff that’s important. It’s why I’m a big fan of "reporting by exception.” In other words, tell me when something alters significantly from the targets I’ve set or from last month's figures. Otherwise, don’t show it.

Good reporting really is about "less is more" — it’s much easier to act on something if you’ve got fewer other facts and figures distracting you. Be ruthless as you’re building a report. If it doesn’t help you make a decision or doesn’t share anything useful, cut it out.

Use high-quality data sources for your reports

A report is only as good as the information it shares. You need to be sure the data you’re using is accurate. There are a few ways to do this:

• Track the data over time and see if trends in the data reflect your own insights
• Get the data verified by more than one source
• Share the reports with people you trust and ask "does this make sense?"

Ultimately, to make confident business decisions, you need to trust the data that’s influencing those decisions. A little verification goes a long way.

Present information in the right way

There are thousands of different ways to present information — Text, numbers, colors, smiley faces, bar charts, pie charts, 3D charts, bubbles. If you could present information in a certain way, I guarantee someone has tried to report on information that way. That doesn’t mean it’s a good idea!

Keep things simple. It should be the information itself that gets attention, not all of the pretty design around it. When you’re looking at a report, think: "Could I learn what I need to from this part of the report by scanning it for five seconds?" If the answer is no, you need to simplify the design.

By all means, use design elements to highlight and emphasize data. For example, if something is below target you might color it red, and if it’s above target, color it green. Your presentation should enhance the message in the report, not get in its way.

Don’t try to make one report do everything

One mistake I’ve often seen is reports that present information from all sorts of unrelated areas in once place. They might combine profit and loss with staff turnover and product development. Unfortunately, this creates cumbersome, overly-long reports and also dilutes the value of a report.

The reason is simple — we like to focus on one particular area of information at a time. This means if we’re looking at financials, we’re receptive to other financial data, and are in the right frame of mind to make decisions about financials. If the type of information we’re looking at changes, we have to recalibrate.

Because of this, keep your reports focused on a particular type of information. Find the right balance between the information you’re presenting and the right report(s) to use.

Decide how often you’re going to read or create reports

How often should you produce reports? The answer is produce them often enough to be useful, but not so often they’re overwhelming. You also want to think about how quickly you need to make decisions and how that fits into reporting frequency. A good rule of thumb is to produce reports on a monthly basis, see how that works for you, and adjust how often you report accordingly.

Now we’ve looked at the ground rules, let’s explore the essential factors for every report.

The Five Essential Parts of Every Good Report

Good reports share five essential factors — bear with me as we get a little technical, and start talking about "Key Performance Indicators" (KPIs), sources, targets, trends, and insights. I promise, it’ll be worth it.

Key performance indicators (KPIs)

What they are: They’re the data points you track that tell you what’s going on in your business:

• Key — Essential to understanding what’s going on.
• Performance — Tells you a story over time.
• Indicator — A way to measure the impact of what’s happening.

How you use them: They’re the actual facts and figures you show, the stats and information that help you make decisions.

Here are a few examples of KPIs:

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by Paul Maplesden via SitePoint