The three-part rule for management accounts commentary, with twelve rewrites

1. The number. How much, in currency and in percent.
2. The comparison. Against what: last month, the same month last year, or budget. Pick the one that matters for that line.
3. The reason. Why it moved. If you don't know yet, say so: "not yet explained; we're checking the subcontractor invoices" is still useful.

Then finish the section with one line on what deserves attention this month. Commentary is usually the last thing written and the part the client actually reads, so it is worth the rule.

Weak: "Revenue increased this month."

Strong: "Revenue was £182,400, up £14,100 (8.4%) on February and £11,400 (6.7%) on March last year, mainly because two new retainers started mid-month."

Weak: "Sales were ahead of budget."

Strong: "Revenue was £7,400 (4.2%) ahead of budget. The retainers account for most of it; project work was slightly behind."

Weak: "Costs were higher due to various factors."

Strong: "Direct costs rose £11,200 (18.7%) on February, faster than revenue, so gross margin fell from 64.4% to 61.0%. Freelance spend on the Ashby rebrand explains about £8,000 of the increase."

Weak: "Margins were down."

Strong: "Gross margin is 3.0 points below budget. Most of the gap is mix: lower-margin project work grew faster than retainers this month."

"Various factors" tells the reader nobody checked.

Weak: "Overheads were in line."

Strong: "Overheads were £78,500, £600 above February and £2,500 (3.3%) above budget. Software subscriptions have risen in each of the last three months; worth a review."

Weak: "Admin costs increased."

Strong: "Overheads are up £8,400 (12.0%) on March last year, mostly two extra hires in September. As a share of revenue they're 43.0%, against 41.0% a year ago."

Weak: "Overall the company performed well."

Strong: "EBITDA was £32,800, an 18.0% margin, up £2,300 on February but £5,900 below March last year. Lower gross margin explains most of the gap to last year."

"Performed well" is an opinion. A director wants the evidence and the comparison, and then decides.

Weak: "Cash position is healthy."

Strong: "Cash was £214,000 at month end, down £18,000, because debtor days rose from 47 to 52. Two invoices to the same customer, £21,500 together, are now over 60 days."

Weak: "Debtors increased."

Strong: "Trade debtors were £316,000, 52 debtor days against 30-day terms. Debtor days have risen for three months in a row."

Weak: "There were some variances against budget."

Strong: "Three variances matter this month: revenue £7,400 favourable (new retainers), direct costs £8,100 adverse (freelance spend), overheads £2,500 adverse (software). Everything else is within £1,000."

Only show the three biggest. Nobody reads forty lines of variances.

Weak: "We will continue to monitor performance."

Strong: "Worth attention this month: chase the two overdue invoices (£21,500), and review whether the freelance spend on project work is priced into those jobs."

That line turns a report into a conversation.

• Numbers first, words second. Finish the P&L, balance sheet and KPIs before writing a sentence; commentary written before the numbers are final gets rewritten.
• One template per section. "[Line] was [amount] in [month], up/down [amount] ([%]) on [comparison], mainly because [reason]." Fill every blank or the sentence isn't finished.
• Trace every number. If you can't point to the ledgers behind a figure, don't print it.
• Keep it short. Four or five lines per section is plenty for a small company's board.

Magic MIS is built around this rule. It drafts the commentary from the trial balance, but the AI writes only the words: every figure in a sentence is filled in by the calculation engine from the ledgers, and a person reviews it before it goes anywhere. There are more examples in the management accounts commentary examples guide, and the method works just as well in Excel.