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Make life easier – de-mystify the numbers
I often work with Directors of small and medium sized businesses who tell me they find it difficult to “read” a set of management accounts.  In other words the problem is facing up to columns of detailed numbers (and sometimes terms not used by non-accountants) and getting useful messages from them that help make good business decisions.  A common complaint and not to be ignored – I hardly ever see a really successful business where the chief executive does not understand his or her accounts.  This understanding really needs to be shared by the whole management team.  If not, people don’t see the implications of their daily decisions and actions.

The next view may sound more surprising, but your business’s accounts should tell you a story; of the last month, quarter or whole year.  Part of my work is with businesses that want to de-mystify their financial results.  There is no single approach that works for everyone, but a few of the common elements include:

  •  Using graphs
    • The “picture is worth a thousand words principle” often works for numbers too
    •  Simple graphs can show different aspects of business performance for each month in this year and the last as well as making the trend clear
      • Remember – a trend is often obscured by the numbers alone
    •  Use different sorts of graphs for different purposes.  For example
      • Bar charts or line graphs can be great for showing sales month by month
      • Pie charts may be better for demonstrating which customers or products represent the most significant elements of your sales and which products make up the largest part of your stock
      • Cumulative line graphs may help to make clear how closely you are tracking your budget
      • Microsoft Excel, that tool so beloved by accountants, can be made to produce these simply to give you an overview of the key parts of your accounts
  • Give thought to whether your accounts reports include schedules or analyses that are unnecessary at present.  Excluding them would make the package smaller and easier to review
  • Consider having your accounts shown in £’000, not in individual pounds.  It’s a statement of the obvious that having fewer numbers on the page makes it easier for all of us to understand them more easily
  • Similarly, don’t have every page packed with data.  While you’re reading one part it’s too easy for the eye to be distracted by something else and you realise that nothing is being absorbed
  • Choosing good, relevant key performance indicators (“KPIs”) can help a lot.  These don’t all need to be financial, just relevant to you because they represent what makes the business tick.  Don’t forget that these too can be shown in graphs for periods of time so you can see whether their trends are favourable or not.
  • Finally, try writing down a few bullet points that capture the story of sales, profits and cash for the period you’ve just looked at.  Ask yourself – “Does this make sense?”  If it doesn’t, you may need to dig just a little deeper, but your understanding of the business gets deeper too.

And the purpose of all this?  Well, we all like a story with a happy ending, don’t we?

I’m an old hand at this, so if you think some help would be useful in reading your story and helping your team to interpret it just contact Robin by clicking the link at the foot of this page, using the Contact page or calling 07870 917272.