Robert Hughes’ excellent book The Shock of the New helped me to understand cubism. A movement that tried to see things from more than one perspective. Cubism broke things down into elements and reassembled them in different ways. It was trying to make sense of a fast-changing and somewhat out-of-control world at the time. Some might say a bit like now.
Anyone that has tried to show a profit and loss report by departments and over different time periods has run up against their own small existential crisis. Especially if they want other people to be able to understand it.
There are a few things you can do to make it a bit easier on yourself, and for stakeholders that don’t feel comfortable with numbers.
- Try to keep each report, a given perspective of the firm, to just one page.
- Focus on the large and variable, not the small and predictable.
- If there is more than one report in a “pack”, colour code them.
- Use the same columns as much as you can.
- Filter data to show, for example, just the one office but use the same format.
- Don’t chop and change each month. Don’t reinvent the wheel.
- Most importantly, track what you spend money for, not what it was spent on. For example, sales salaries are customer acquisition costs, and should not be just bundled up with wages.
If you see a P&L with pages of small expense lines like “taxi fares” and “filing fees” and one huge “wages & salaries” amount the audience will, quite rightly, say “people are by far our biggest cost” but where do you go from there?
All too often people have taken a blunt sword to headcount based on this sort of thinking – thinking underpinned by bad reporting.
The best way to think about effective reporting is to imagine that your business runs on ratios and interdependencies (and it does), your reports should show the health and efficiency of those elements. Ideally with an eye on matching industry best practice ratios.
Q: How many lead guitarists does it take to change a lightbulb?
A: “One, but I could have done it better”