Most business owners and managers know that their KPI (key performance indicator) reporting could be better.
Read more: Harnessing KPIs for Better Business
While your business might be producing regular reports to staff and stakeholders, the resources that go into them could be a serious drain on your productivity.
This is generally a result of not having a robust, automated reporting system that makes it easy to gather, process, and present data.
If it’s any consolation, you’re not alone.
A survey of more than 400 global chief financial officers last year found that 43 per cent of them thought that their reporting processes were inefficient.
Perhaps more telling is that less than half (46 per cent) of them thought that their reporting was effective in meeting stakeholder needs. So there is widespread acknowledgement by businesses worldwide that they are failing to produce effective KPI reports.
But do you know what KPI reporting mistakes your business is making?
Without understanding the common KPI reporting mistakes, you can’t identify simple solutions or put enhanced processes in place.
And in today’s highly competitive business environment, improving management reporting is not a luxury, it is a necessity.
Common KPI reporting mistakes
1. Excessive resource requirements
Producing effective and insightful KPI reports can be a lengthy process that involves gathering, verifying, formatting, and visualising data for different departments and audiences. A common KPI reporting mistake is investing too much time in this process, to the point that it can be detrimental to a business.
According to the aforementioned survey of CFOs, 85 per cent of them said that they were spending too much time gathering data, confirming its accuracy and consistency and formatting reports. “When all's said and done, there’s no time left for the value-added analysis needed for strategic decision-making.”
There is also the hidden resource cost of staff doing all this work simply to get the information they need to do their jobs. This kind of workload can result in the lowering of morale, reduced productivity and potentially costly staff turnover.
2. Lack of centralised reporting system
The absence of a centralised reporting system can lead to inconsistencies and inaccuracies in your reporting. Compiling a KPI report will often mean gathering data from different departments. It can include financial and non-financial measures. This data is commonly exported to a third-party application like Microsoft Excel, and sometimes even exported again to a presentation software like Powerpoint.
This lengthy process limits the ability to conduct comparative reporting and also requires a lot of time to confirm the validity of the data with it being transferred from one platform to another.
This manual aggregation of data from various systems to create a “single source of truth” suggests that combining operational and financial data into a centralised system can decrease reporting time and improve accuracy.
3. Reporting too frequently
Just because the data is available and you can report on it doesn’t mean you should. A common mistake businesses make is reporting too frequently. This increases the opportunity for inefficiency and inaccuracy. It’s a drain on the staff responsible for producing reports and can lead to information fatigue.
We recommend reporting back to staff and stakeholders up to 12 times a year, or monthly. But we’ve heard of CFOs being required to prepare up to 40 reports per quarter. That’s far too many, in our view.
4. Using unreliable tools
Many businesses are relying on inadequate tools and systems to process and present their data. According to the survey of CFOs, Microsoft Excel was identified as a key a source for errors and inefficiency. Disparate ERP (enterprise resource planning) systems within an organisation were also identified as causing difficulty. And yet businesses continue to rely on error-ridden spreadsheet-based reporting to make important strategic decisions.
There have been numerous cases of companies switching from a basic reporting system that required considerable manual intervention to a more robust automated system and finding that they have been basing business decisions on faulty data for years.
5. Missed opportunities
All of the mistakes outlined above can lead to missed opportunities for a business. Without a solid KPI reporting system in place, it’s more difficult to identify business opportunities and adapt quickly to market forces.
How to avoid these mistakes
1. Store your data to the cloud
Store all your latest financial data in the cloud, rather than spreading it across separate reports and spreadsheets. This way it’s easily accessible and your staff can focus on making decisions without having to hunt for the relevant data required to make them. The main reason building reports are costing your business time and money is the hassle of gathering data from multiple sources. Keep it all in one place and problem solved.
2. Move to a self-service model
Consider moving towards a self-service reporting model—providing staff and stakeholders with direct access to company data so that they can run their own reports and queries. Providing direct access to a user-friendly business intelligence (BI) tool or interface removes the barriers to access real-time data that informs day-to-day decision-making. It can improve business performance and efficiency.
3. Have a single source of truth
A single source of truth means “structuring information models and associated schemata such that every data element is stored exactly once”. That’s the technical version. It basically means that your business has one source for its data that everyone agrees is the “single source of truth”. It means that if there’s an error in your reporting, there’s only one place to change it. You don’t have to go searching through pages of reports or old spreadsheets to see where a number might have been input incorrectly. According to Business Insider, 69 per cent of CFOs say keeping information siloed is the biggest financial mistake companies make. Having a single source of truth breaks down the information silos across departments and locations.
Learn more about using KPIs to maximise your business performance in our free ebook!