Enhancing financial reporting so that they add value to the decision makers who use them is what I really enjoy. Call it “bringing the numbers to life.”
Like all chartered accountants, there will be a topic within our profession that we aim to excel at as a subject matter expert. I’d like to think mine has been ensuring finance teams add value to the business they belong and this includes the reporting.
In 2013 I completed my first book which is called “Bean Soup - Beyond Bean Counting – Steps for Lifting a Finance Function Skill Set towards Adding Value.” Over the next couple of years I presented to my peers as that expert at Chartered Accountant and CPA conferences here in New Zealand and across all of the main centres of Australia. I was even invited to present in Sri Lanka.
Then work got busy, family got busy, life got busy and I filed away the PowerPoint presentations, Post-It notes and beloved electronic pointer.
To follow comes from the book and the presentations which I hope helps you challenge the reports you currently use in your business to measure performance, highlight trends and ensure your business is on track as planned. This is by asking four questions, each of which make up the Guiding Principles to Meaningful Analysis.
Whether in aged care or operating a GP clinic, there is a minimum amount of financial and non-financial information that needs to be available to proactively manage the performance of the business. Within health care there will be differences based on a business’s current strategy.
Loads of data may be available but is it in a format that makes it easy to understand and interpret opportunities and issues? The definition of “analysis” is the breaking down of complex data into small parts to make them easier to interpret.
Stephen Few wrote in his 2009 book, “Now You See It”
“We don’t have too much information. Its quantity and rapid growth is not a problem. In fact, it represents a wealth of potential. The problem is that most of us don’t know how to dive into this ocean of information, net the best of it, bring it back to shore and sort it out.”
Just like the dashboard in your car you need to have available financial and non-financial information providing critical trends to ensure you are heading in the right direction.
Here are the Guiding Principles to Meaningful Analysis from the book, “Beyond Bean Counting” (refer page 156) that will assist in deciding what type of financial reporting visual you need. There is a simple illustrative example, bureau costs, for each of the four guiding principles:
1. Understand your needs
We need to identify specifically what is needed as a well-balanced set of reports covering the key drivers of the business and the important strategies being progressed. Each table or graph needs to be easy to understand by a wide range of users.
For example: Bureau costs may be a key strategy for the current year that a business is looking to tightly control and even reduce. We need to keep an eye on bureau costs that have been creeping up over the past few months as per the following report extract.
2. Select the format that best represents a need
Ensure that the data is presented in a format that ensures simple interpretation rather than a wall of numbers that can appear meaningless to someone who is not a financial whiz. This requires using the most appropriate type of visual analytics.
For example: A line graph is the most appropriate visual way to show a month to month trend of increasing bureau costs. Although the table above shows just three months and is easy to compare, beyond three months data, it will become cumbersome.
3. Clearly interpret
With the right format it becomes easy to understand the story behind the numbers of what the current trajectory is for the whole business or parts of it. Now we need to investigate why.
For example: Our line graph now has seven months of data to compare and this shows that bureau cost has been increasing for a few months. On investigation we have found that the winter period has seen an increase of clinical staff on sick leave. With a clearer interpretation of the trends we can ask questions like is this unusual and what should we do next?
4. Conclude on outcomes and next steps
Based on the outcomes from the information presented it will be possible to better identify the actions that are required to reverse a negative trend.
For example: We extend the line graph back 18 months and can see a similar seasonal increase in the prior year. The action required is to ensure bureau costs reduce in line with expected seasonality. If not then you quickly look for other reasons.
We can also see than each year bureau costs start to increase in about May. How can this increase be reduced and that may be through strategies such as starting a vaccine program for clinical staff earlier in the year so as they are less likely to get sick.
The bureau cost illustration was a simple example but essentially you repeat these principles for all of the important key performance indicators in your business. For aged care this will be occupancy, bed mix, staff costs to revenue ratios, staff turnover etc. and for primary health enrolled patients, demographic cohort they belong, roster costs etc.
So, as a reminder, here is a summary of the guiding principles for meaningful analysis:
Also remember to review your reports regularly to ensure the key measures for performances are still aligned and relevant to your business and strategy going forward. And ensure they are available and in regular and full view of you, you’re senior managers, Board of Directors and all of the team driving your business to success, just like the dashboard in your car.
We can help:
Starting with a quick review of your report – they may already be amazing - we can assist with improving timely (daily, weekly, monthly) financial reporting and dashboards that add value by linking the right key performance indicators (KPIs) to your strategic plan and budgets. We can also assist with comparison of your performance across the industry.
Peak Care Advisory
Mob: 021 252 5778