Effective report writing
| by Stewart Dickinson 19 Oct 2007 Diploma in Financial Management Relevant to all papers |
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To help candidates to improve their answers and take advantage of the marks available, this article will provide guidance on good report writing.
Report (n) Account given or opinion formally expressed after investigation or consideration, The Concise Oxford Dictionary
Reports are a central part of modern business life. Indeed one of the key organisational documents is the Annual Report and Accounts which neatly complies with the general definition quoted above.
Reporting is an integral part of an individual manager’s life as the written word is a main line of communication within and between organisations. Clear and effective communication of financial and non-financial information is a key outcome of the Diploma in Financial Management, and the examiners often ask for answers to be given in a report format, particularly in the projects. Feedback suggests that many candidates do not follow the instructions (see December 2006 feedback on the Module A project, for example) and lose marks because their material is not communicated effectively.
Future papers may take the opportunity to reinforce effective communication by awarding a small number of marks for good use of the report format. This will be clearly stated in the requirement and the number of marks available will be given.
It is not the intention to be prescriptive about a specific format, but rather to use the chosen format to communicate effectively. The three main characteristics of a good report are:
- Clarity of presentation - Is there a clear structure? Is there a contents page? Are the diagrams and tables neatly presented?
Readability - Is the information clear and concise? Is it easy to navigate, for example through cross referencing or directing to diagrams, tables or appendix material? - Coherence - Is the reader led through the material in a logical way? Are the conclusions and recommendations well supported by the analysis and examples if appropriate?
When setting projects, the examiners try to write realistic scenarios that allow candidates to demonstrate that they can use their knowledge by applying it to complex problems. Unlike the time-constrained exams where the questions tend to concentrate on a relatively narrow range of knowledge, a project allows much greater flexibility in constructing an answer.
Types of reports
Reports fall into two broad categories. The first is simply a record of events that occurred, for example a report of an accident. The main purpose of this type of report is to provide a permanent record of the ‘facts’ of the event.
Some facts are real and concrete and can be supported by evidence - photographs, measurements, etc. Others are based on the accounts of participants or observers. Such reports may be the basis for future action, but that is not their primary role.
The second type is more commonly used in business and management and is usually commissioned to provide a basis for future action. Such a report may include significant amounts of factual material, but the primary purpose is to answer a question.
It therefore follows the words of the definition at the beginning ‘after investigation and consideration’ and would usually result in a set of conclusions and recommendations.
Format
Many organisations use a standardised form of reporting, particularly for routine reporting, and providing a permanent record. The Annual Report and Accounts of companies is a good example of a standardised format and has the added advantage of aiding comparability between companies.
For individual reports - such as the type asked for in DipFM projects - there is no set format. It may be helpful to create a template in your word processor. Microsoft Word, for example, has samples and instructions on how to personalise your template. The main format requirement is to have a clear means of navigating through the report using headings and sub headings that are consistent. A paragraph numbering system can also be useful - particularly in longer, complex reports that might require cross referencing. Avoid, however, the temptation to have too many levels of numbering.
Structure
The structure is usually determined by the questions set in that there are specific topics that need to be covered, usually sequentially. In general reporting the structure is often hierarchical. For example, a report on an overseas promotional visit is likely to have a general background of the country visited, a review of the main characteristics of the market, followed by a more detailed account of the activities undertaken (exhibitions attended, customers visited, etc), a summary with conclusions and recommendations, drawn directly from the report will allow the development of a course of action.
For DipFM project reports, the ‘Requirements’ usually determine the structure. For example, Paper DA2 in December 2006 was in two broad parts reflecting the balance of the syllabus. The specific questions determine the structure, and the marks an indication of the amount of content required. Even if the structure is obvious, it is often useful to have a brief introduction explaining what the structure will be. In this example Parts (d) and (e) asked for specific proposals (recommendations).
To be effective, these must be specific and evidenced, not just a list.
Description versus analysis
Description should be limited to that which is necessary to provide background for the reader to understand the context. The scenarios in projects have a lot of description to enable candidates to understand the context, but it is not necessary to repeat much of this because the reader (in the case of projects, the examiner) knows the context and is interested in how candidates have used the material to answer the questions. Therefore, a brief descriptive introduction outlining the purpose of the report is all that is needed. For example ‘This report concerns company XYZ, operating in the ABC industry and provides an analysis of…’.
Analysis (to examine critically) is at the heart of good report writing where the outcome is to form the basis for action. Analysis adds meaning to facts by setting them in a context.
For example, a monetary figure of profit for a company has limited meaning on its own, but gains meaning when it is compared with, for example, level of sales, to give a profit margin figure. Criticality means adding some commentary, for example about whether the margin is good or bad, supported by evidence or theory. It is acceptable for the report writer to add their own view or judgement, provided that it is supported by evidence.
Using financial information
By their very nature, DipFM projects normally include financial figures. In most cases they will be the raw data, for example costs related to an investment, income statements, share prices, sales revenues etc, which you will need to manipulate to provide information. In most cases you will need to use recognised techniques to turn the data into information that answers the questions. In some cases - such as calculating valuations of businesses or assessing financial performance – you may have to use a range of techniques, either because they are asked for or you have to choose. Marks are usually awarded for the use of appropriate techniques, so it is important to make clear what techniques you are using and why.
You will have discovered in your studies that most analytical techniques have distinctive characteristics, advantages, and drawbacks, often based on the theoretical perspective that underlie them. A reader would look for some explanation and justification for your choice - for example, business valuation models are based on fundamentally different perspectives of value and give different answers. A report valuing a business would almost certainly include more than one valuation and the writer would explain the differences in outcome and probably comment on which is the most appropriate in the context of the investigation.
Tables and graphs
Financial information is usually best presented in tabular or graphical form, and in some cases, such as an investment appraisal, the table is essential to provide the information necessary to make the decision. Word processors and spreadsheets provide the opportunity to integrate tables into the report. Clarity of labels in tables helps the reader follow your calculations, and notes of assumptions can also be useful. Sometimes you will need to make a choice about how much detail you need to include in the body of the report, and how much can go in an Appendix.
Tables need some form of narrative to help the reader. There are no hard and fast rules about which comes first, but a reader should be led through by, for example, placing the explanation you want to give close to the numbers rather than putting it on a separate page. However, tables should be numbered using a system related to the main numbering system of the report, so that they can be
referred to easily.
Graphs and charts can be used to provide an alternative view of information. They are particularly useful for making comparisons and showing time series. Because of the ease of creating visual representations using functions in spreadsheets, there is a temptation to do too many. They should only be used to reinforce the point you are making. They can be particularly useful in combining information from more than one table such as showing trends for one company against another or in comparison to the market.
Presenting conclusions
Conclusion - ‘Proposition deduced from previous ones’.
In many reports, conclusions draw things together at the end, but can also be made at the end of sections. This can be useful when the sections are not directly connected and it is useful for the reader to know what the writer has concluded before moving on. The key point about a conclusion is that it should logically flow from the analysis provided, and may often be accompanied by qualifying words. ‘If the objective is shareholder wealth maximisation, then this project should be rejected. However, there are features of the project that have merit and…’.
It can be useful to bring together the key conclusions at the end of the report - perhaps in ‘bullet’ form - to summarise the more detailed conclusions at the end of each section. Question 2 of Paper DA2 in December 2006 would be a good example where a summary conclusion covering all five parts would be useful as they were interrelated and a summary would help in showing the reader that you had a good understanding of the topic, rather than, as the examiner noted, relying on long lists.
Making recommendations
Reports do not always require recommendations, particularly if they are of the type that simply report facts. However, as noted earlier, reports to management are usually drawn up as a basis for action (or inaction).
Recommendations should clearly follow from conclusions, which in turn flow from the analysis. Using the example in the previous section, although the conclusion might be to reject the project, the writer is signalling that it is not clear cut and a recommendation might suggest further work to investigate other merits related to the investment project. It is quite normal to offer a choice of recommendations because things are never totally clear cut. The decision maker should, however, be able to see from the body of the report the arguments that lie beneath the choices.
Use of appendices
By their nature, financial investigations generate large amounts of material. In some cases it is obvious what needs to go into a report, but in others a choice has to be made. The main criterion that determines what is included is the question ‘does the reader need this to understand the point being made’. It is tables and graphs of facts and figures that usually cause the most problems. There is a tendency to put every thing in and let the reader (or marker in the case of DipFM projects) choose what is important. In fact, the decision is easy if you identity the essential on a hierarchical basis.
A good example would be the presentation of performance analysis of a company. The essential would be a table summarising the key ratios used, with an explanation justifying the choice. The narrative might have specific figures extracted for comment and graphs used to emphasise the points made.
Additional information such as the original data and detailed calculations might form a useful appendix for the reader to access if needed. However, it is key that appendices are always referred to in the body of the report, not just added in the hope that the reader might find something useful. Commentary such as ‘Table 3.2 shows the key ratios calculated for 2003-7 and Graph 3.1 highlights the comparison with the sector for the same period. Details of the sources of the data are shown in Appendix 1’ will make this clear.
Quoting sources
It is often necessary to refer to outside sources to support positions taken in a report. Such sources might include books, websites, journals, newspapers, or other reports. These should be clearly identified by listing at the end using author, title of publication, and date so that a reader could access them if necessary. It is not necessary to use a formal academic citing convention, although if you are familiar with one, such as the Harvard system, then by all means use it.
The Executive Summary
Although the Executive Summary appears at the beginning of a report, it is the last part to be written. A draft might be prepared as the main body of the report is constructed, but it can only be finalised once the report is complete. It is also sometimes referred to as the ‘Abstract’ (definition - summary or essence). Its purpose is to give the reader an overview of the content of the report.
For a busy manager, it performs the useful function of getting over the key points and giving the choice to read in more detail if required. It often has the conclusions and recommendations. A decision maker can then either accept the report, accept it with some further investigation, or read it in detail.
I have read many hundreds of reports of an academic nature in the fields of finance and general management over the years. My technique in assessing them is to read the Executive Summary which sets my expectations for the overall shape and contents of the report. Then I read enough of the introduction to determine what the questions are going to be, and then I move to conclusions and recommendations to see if they have been answered. Only then do I move to the body of the report to seek the justification for the conclusions and determine the coherence of getting from one to the other.
The Executive Summary for a 4,000 to 5,000 word report will probably be about 300 to 400 words, or around one-and-a-half A4 pages of 12-point 1.5-linespace type. This article is about 2,500 words long and has 12 sections. Before I wrote the following Executive Summary, I printed off the draft and read it through from start to finish. Not only did this give me the opportunity to assess whether it was logical and coherent, it also identified errors, typos, and poor expression - most of which I hope I have corrected!
Executive Summary
This article provides guidance on report writing with particular reference to using the report format to answer project questions set for the Diploma in Financial Management (DipFM). The main emphasis is on effective communication using a mixture of financial information and informed commentary. Past DipFM papers and examiners’ feedback are used to illustrate specific points.
A brief introduction defines types of reports and identifies characteristics of a good management reports that provide recommendations for action. Suggestions are made about format and structure, including the use of word processor templates. The analytical nature of reports is discussed, highlighting the importance of analysis in producing convincing answers to set questions.
Guidance is provided for the effective presentation of financial data including the use of tables and graphs. There is discussion on the use of appropriate techniques to turn data into information and explanation and justification of techniques is encouraged. The report writer is advised to always consider the report from the point of view of the reader, who needs to be guided through the material.
The outcome of a report is usually a set of Conclusions and Recommendations. These may be identified within the report at the end of the relevant section or summarised at the end. In all cases they should follow coherently from the analysis of the data used. The article finishes by providing specific guidance on the use of Appendix material, quoting external sources, and drafting an Executive Summary.
Stewart Dickinson is subject coordinator for the Diploma in Financial Managment