Vertical and Lateral Reports
What Is Report Writing?
A report is a systematic arrangement of statements that establishes and analyses a specific issue or problem. A report aims to tell its readers. To put it another way, a report is a piece of writing that is organized around identifying and assessing issues, events, or research results that occur in a concise manner. Some of these include corporate events or findings from research projects or interrogations. A report must be completely objective. Vertical and lateral reports, as well as formal and informal reports, are examples of reports.
Features of Reports
- You should write the report in the proper format and style. The type and style of the report is determined by the reason or purpose of the report.
- It is organized for a specific purpose, one of which is to pass information. Other purposes include collecting records, providing direction to action or judgment, and providing evidence, among others.
- A report should be specific.
- A report is basically base on facts and is frequently includes statistics, references, and other supporting materials.
- The primary purpose of a report is to communicate facts to a single person, a group of people, members of an organization, or the general public.
- Reports must meet specific criteria to be effective.
A vertical report is distributed across your group's hierarchy. A proposal, which the team's leader must approve, is an example of this reporting.
A lateral report is divided among teams. A project proposal, such as trying to secure financing for your project, could also fall into this category. You should present your proposal to your local group and the finance department.
How does Vertical report work?
You can use a Vertical report on financial statements, balance sheets, or income statements to recognize the percentages of each line item to the total, key trends that happen over time, evaluate multiple companies of varying sizes, or evaluate a company's financial statements to industry averages.
The data you collect will be more meaningful and easier to understand if you use portions to conduct these financial analytics and comparisons.
Because the Vertical report approach uses proportions to reflect each line item, you can contrast a company's relative financial accounts to those of another company or the corporation's industry average irrespective of whether the other company's or industry average's total sales are slightly lower than the company you're analyzing.
If you want to run a Vertical report on an income report that doesn't yet show each line item as a proportion, divide the financial statement amount by the defining factor and multiply the resulting divided by 100.
Vertical report writing
Vertical report writing can sometimes be tricky, but we will show you some Vertical report example to learn how to write a Vertical report.
Vertical report example
For example, by displaying the various expenditure line items in the financial statements as a percentage of sales, one can see how they affect profit margins and whether cash flow improves over time. As a result, it is easier to compare a company's profitability to its competitors.
This vertical report example will help you in vertical report writing
The term "vertical report" refers to the up-and-down of your eyes as you scan the general financial statements during the analytical process. Management commonly uses a vertical report to detect changes or variations in essential financial statement items such as individual current assets or asset groups.
The concept of vertical reports is similar to that of benchmarking. To evaluate the business's success, management establishes a base amount or benchmark goal. The base amount is typically derived from an aggregate of financial statements from the same fiscal year.
The financial item can then calculate using the common-size percentage formula. The overall percentage rate is calculated by dividing the analyzed item by the benchmark's base number and multiplying it by 100.
This proportion can use to compare the company's balance sheet and income statement performance. Vertical reports, like ratio analysis, allow financial information from a small firm to compare to that of a large company. The popular size percentage can also use to compare companies in the same industry or those using different currencies.
Vertical report advantages
You can improve your business strategy.
A vertical report can assist financial managers in better understanding how money is spent. They could use this to evaluate the success of their current funding strategy. One method is to contrast the financial value of a line item's proportion of spending allocated to its overall success.
For example, if a particular marketing campaign has consumed 15% of a project's marketing budget, a financial team may examine the results to determine its effectiveness. If they evaluate that the campaign was worth 15% of the budget, they may proceed or expand it. If they determine that the money would have been better spent elsewhere, they can re-allocate it or use the information to build a better financial and marketing strategy the next time.
You can make comparisons within a company.
Vertical report writing can make comparing financial statements and budgets of different departments much more accessible. For example, you could use the proportion calculated during the vertical report process to determine how much of the total budget is spent on personnel by two different departments. This is one tool that company executives and financial officers can use to analyze their organization's spending.
You can talk about money more easily now.
The vertical report has the advantage of simplifying the line item effect and the entire economic statement. This may make it easier to discuss financial matters with non-financial personnel. This is useful for the company's internal matters such as cross-departmental meetings, company reports, or presentations. It can also communicate with outside parties such as investors or news outlets.
Disadvantages of Vertical report
Inadequate use of standardized percentages
When running a vertical report, you may only look at a subset of line items compared to the overall economic total. As a result, these assessments may lack the background of standardized percentages to compare your findings. The proportion that each item reflects may not help you understand the data's significance.
You may try to find guidelines for standardized or suggested percentages for different line items for some types of financial statements. This process can be time-consuming and may not be accessible for more specialized industries or document types. This type of standardized analysis is limited in its application if you do not have standardized percentages to compare your findings to.
Simplicity over quality
While a vertical report is beneficial for simplifying a financial report, its ability to do so may leave out certain important factors. For example, it may not reflect the importance of a specific line item, what kind of work has gone into developing it, or why it is important. This means that using vertical analysis; financial analysts can improve the quality of their findings by incorporating an understanding of factors other than the percentages discovered during the vertical analysis process.
In terms of measuring liquidity, this is ineffective.
A liquidity measurement or ratio is a financial system that allows a company to understand its ability to pay debts while remaining financially viable. This is a critical financial tool for a business, and performing vertical reports does not help with this understanding. This is an example of a situation in which financial officers may need to combine vertical reports with other financial products, such as trend analysis or ratio assessments, to gain a comprehensive understanding of their company's financial position.
There is no explanation for "why."
Vertical report writing yields concrete mathematical data in the form of percentages. While this may assist you in understanding what is happening in the income statement, it may not assist you in understanding why it is happening. For example, in a company's income statement, you can use vertical analysis to see that a specific project generated a significant proportion of that quarter's gross income. The vertical report may not address why the company was so successful or what the company might do in the future to maintain that success. To grasp this, you may need to complement the work with a different type of analysis.
Difference between Vertical and Lateral Reports
This report writing classification refers to how a report moves. Vertical reports move up or down the hierarchy, and they help with management power. Lateral Reports writing on either hand, aid in organizational coordination. A lateral report is a report that travels between units at the same organizational level.
Characteristics of Good Vertical and Lateral Reports
These are some Characteristics of Good Vertical and Lateral Reports.
Good Vertical and Lateral Reports has a Clarity of Thought:
Vertical and lateral reports written simply, straightforward, and lucidly are the best. Its language should be simple and easy to understand. There should be no ambiguity in terms of the statements made in the report. The reader should comprehend the entire report with ease, precision, and speed. This is, after all, the primary goal of report writing.
Good Vertical and Lateral Reports are complete and Self- explanatory:
Vertical and lateral reports should always be comprehensive and self-explanatory. It is best to avoid repeating facts, figures, details, conclusions, and recommendations in this way. Reports should always be comprehensive and self-explanatory. It should provide readers with accurate and complete information.
Good Vertical and Lateral Reports are Comprehensive but Compact:
Lengthy reports aren't always the best Vertical and Lateral Reports. A report should be a short document. Simultaneously, it should provide a complete picture of the situation which is investigating. In this sense, report writing should be thorough but concise.
Good Vertical and Lateral Reports are Accurate in all Aspects:
Another feature of good Vertical and Lateral Reports is that they must be accurate in every way. The information provide and statements made in the report must be accurate and thorough. Writing reports is a responsible job because reports are used as a reliable document for making decisions and establishing policies. As a result, report writing should always be accurate, factual, and trustworthy.
Good Vertical and Lateral Reports has Suitable Format for readers:
The proper format is required for good Vertical and Lateral Reports. It should be appropriate for the report's format. The title, beginnings, findings, and recommendations should include in the Vertical and Lateral Reports. The reader will appreciate this.
Good vertical and lateral Reports Support Facts and are Factual:
A good report will always be factually correct. The report's findings, inferences, and recommendations should back up by data and information gathered from reputable sources. Statistical tables should back up the report's assertions. When writing a report, this aspect of reliability must be taken into consideration.