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The importance of formating

“It ain’t whatcha do, it’s the way thatcha do it, That’s what gets results” (Oliver and Young, 1939) “The medium is the message” (Marshall McLuhan, 1964) A lot of the work that we accountants do is aimed at conveying information; often new, occasionally surprising, information.  We spend hours with the information, understanding it, compiling it, often re-compiling it, until we arrive at a final spreadsheet which accurately displays (to us) the truths held in the data. Unfortunately, because we spend so much time “in the weeds”, we often end our time with the data too early, without imparting those final touches that make it easy for the eventual reader to easily see, with a quick perusal of our work, the truths we’ve gleaned by spending hours with the data.  Often, we present to the reader, not a clear summary of our work, but our in-process work - a spreadsheet designed and formatted for ease of processing data, not ease of understanding information. This section is about that last step - formatting your information so that readers can quickly and easily consume your work.  We’ll look at layout, use of colour, summarizing information, and font and number usage as it relates to your final work product; what the user will read.  I’ll also introduce some “rules of thumb” that I’ve picked up over the years regarding what works and what doesn’t work. None of this, however, is hard and fast.  I’ve worked for a variety of bosses and clients over the years, and each one had their own ideas of what is an appropriate presentation.  Some want more data, some less; some want the ability to interact with the data, others are happiest with a pdf.  Ultimately, the best presentation is one that conveys whatever truths you’ve discovered in the data to the specific end-user; only you know who that will be, and what works best for them. Formatting is more art than science, so this section is more about presenting options you can use, not providing rigid rules that you must use.  At the same time, this is probably the most important section of this website, because the rest of the website is about how you work with the data; this section is about how you convey information, and that’s what will ultimately have the greatest impact on your career. Before we get into the meat of this section on formatting and structure, I’d like to introduce a concept that I call the Knowledge Pyramid: Simply put, Data, on its own, is meaningless.  It requires CONTEXT; with sufficient context, data becomes Information.  Similarly, on its own, Information is powerless; it also requires context to become actionable; something called Knowledge (or Actionable Information). Suppose you have a number:  42.  Doesn’t tell you much, does it?  We add context by asking the 5 W’s & an H - Who, What, When, Where and Why, and also How (or How much).  So, Who:  Let’s say that 42 refers to your Company’s financial statements What:  42 is a value, in millions of dollars When:  For the fourth quarter of fiscal 2011. Where:  On the revenue line of your Income Statement Why:  It is generated by operations and calculated according to your Company’s revenue recognition policies How:  In this case, we don’t have an answer to the how. So, after adding context, we now have information:  Your Company recognized $42M in revenue for fiscal 2011.  That’s an interesting thing but, without further context, we don’t know what to do with it. To turn Information into Knowledge, we apply the context of comparison.  We look at all the things, inside the company and outside, that help us understand what we should do with our new-found information. First off, there are internal comparisons:  Our Forecast, our Cost of Sales, and our Previous Quarter.  Let’s say our Forecast expected $45M in revenue - we’re shy by $3M, or about 7%.  That looks bad. Then we compare to Cost of Sales.  Turns out our cost of sales was $30M, and we had Forecast $38M.  So, although our sales are $3M under target, our Gross Profit is $5M above target.  So, some good, some bad. Comparing to our Previous Quarter, we can see that we moved from $40M last quarter to $42M this quarter.  So, we did experience growth, just not as much as expected. How about external comparisons?  Let’s look at what happened in our industry and the economy as a whole. Turns out the industry suffered a 4% reduction in gross sales, and the economy grew by 1%.  So, we grew faster than the economy (5% vs 1%) and much better than our industry (5% growth vs. 4% decline).  Of course, there are all kinds of other comparisons we can make, but usually 5 or 6 comparison points is  sufficient.  It appears that, while we didn’t meet our targets, we outperformed our industry and the general economy, and turned a higher gross profit while doing so.  We now know what comes next - let’s understand why we were able to cut our costs so dramatically, and why we were able to grow while our competitors, on average, declined.  We should probably pay out some bonuses as well... As an accountant, you are expected to provide, at least, Information - that is, Data with sufficient context that it can be compared to other things.  You may be asked to do that comparison, and to provide Knowledge that the company can act on.  You may even be in a position to partake in the decision making.  Knowing this, you should understand that how people read the spreadsheets you provide them makes a big difference.  You may glean, after working for hours with a spreadsheet, that the company had a good quarter, but if all that people see is the miss vs targeted revenue, the Company may never understand all the good things that happened, and may not be able to capitalize on them. This section will focus on making your work CONSUMABLE, so that decision-makers can use it easily and quickly to come to the right decisions.  HOW you present your information is, in some cases, even more important than what the information is.