Why Financial Reporting Needs More Visuals—and How to Get Them

Financial reports, whether you’re using them to analyze the profitability of your business or scout for investing opportunities, can be hard to understand, even if you’re an expert in the industry. High-level figures, like profits and losses, might be easy to spot if you’ve structured the report to draw readers’ eyes to them, but making sense of the rest of the data can be challenging.

In general, the financial reports we create and review need to have more visual elements. And thanks to the availability of new reporting technology, we now have the potential to include them.

Why Financial Visuals Are Important

Take a look at some dashboard examples to get a feel for how objective data can be presented in a visual format. Charts, graphs, and breakdowns can take many forms, but they all have the capacity to convert non-visual information into visual information.

Visuals have several advantages:

1. Appealing to intuition. Human brains are wired to easily process visual information. In fact, we process images about 60,000 faster than we process similar information presented in a text format. Visuals are much more intuitive and don’t require as much thought, speculation, or slow processing to figure out. Take the simple example of tracking a company’s revenue over time; sure, you’ll be able to figure out whether revenue is growing or shrinking by studying each quarter over the past several years, but you’ll be able to figure that out in a split second when you see those numbers in chart form.
2. Presenting to non-experts. Visuals are also helpful when presenting your findings to non-experts, or if you’re not an expert in the field yourself. For example, if you’re an entrepreneur who majored in business, you might have some understanding of finance, but it’s not your field of specialty. Graphs and charts can make otherwise complex information much more accessible to you. If you’re presenting data to investors or clients who have an even more limited understanding, visual can spare you significant trouble.
3. Highlighting data from different angles. Data visuals also give you a chance to present information in multiple different lights, and quite easily. Assuming you’re using an interactive dashboard tool, you can present multiple versions of the same graph, each excluding a different variable. Not only is this a faster way to process data, but it also helps you get a little closer to the “truth,” much like how each of the men in the “blind men and the elephant” parable are only able to evaluate a part of the whole.
4. Comparisons and trends. Similarly, graphs and charts make it easier to make side-by-side comparisons, or to evaluate trends as they unfold across multiple dimensions. The more data points and variables you introduce into a financial report, the harder it is to compare one year to another, or one category to another. Data visuals give you a foundation you can use to make adequate comparisons.
5. Interactivity. Most data visuals can be both automatically generated and manipulated by a human analyst. Tweaking the parameters or changing the display method can give you a sense of control over the data, and allow you to generate the specific displays you need to make a better decision. This is practically impossible if you’re just wading through a spreadsheet with thousands of numbers in it.

The Caveats

However, there are some caveats to using visuals in financial reporting. Relying too heavily on visuals can lead to inaccurate assessments and assumptions, since they can’t possibly provide you with a comprehensive view of every data point. You can make up for their weaknesses with the following steps:

1. Use the right platform. Every dashboard with data visual elements is going to function a little differently. You’ll want to choose a platform that’s intuitive to use, but one that doesn’t overly simplify the process or limit your access to the raw data. It also helps to have a platform with some automated features, so you don’t have to create charts manually every time you need one.
2. Make multiple projections. It’s a bad idea to rely on a single graph or chart to form your conclusions. Any single data visual can be misleading, so consider working up multiple visuals in tandem.
3. Avoid goal-oriented manipulations. It’s tempting to create visuals and manipulate the parameters to tell a convincing story; for example, you might try to prove an existing assumption you’ve held, or demonstrate more value to a client. However, these manipulations compromise the objectivity and integrity of your visuals.

More and better data visuals can help entrepreneurs, financial experts, and investors better understand their environments—and ultimately make better decisions. Adopt the right tools and start integrating more visuals in your own financial reporting.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.