Reporting

What is your board looking for when you report your finances?

Running a business requires owners to be multi-faceted. You need good sales techniques, a handle on the accounts, sound market knowledge, not to mention a hefty dose of optimism.

For companies that have a board of directors to answer to there are even more areas that need covering, one of which is performance reporting.

What is performance reporting?

The purpose of performance reporting is to promote action. A good report should contain all the information necessary to facilitate decision-making at board level.

Whether you have a finance department, a spreadsheet or a great accountant, you’re responsible for making sure that not only is the report delivered but it’s accurate and well presented. You’re reflecting the overall health of your business and it must be unbiased, even-handed and multi-dimensional.

If the board is to exercise its strategic, long-term planning function fully, it needs to focus on more than the business’ current performance indicators. Historical performance ie, how it measures up to past objectives, is a necessary benchmark to cover, but this can be a poor predictor of the future and shouldn’t be the only consideration. You need the full 360º view of the business and that includes the past, present and future. The board should, therefore, have some forward-looking information at its disposal, including trends, projections and business forecasts.

Getting started

When required to submit a report to the board, it’s not just the content that needs to be looked at, but how the information is presented as well. There are some simple mistakes that can be easily avoided. The following are the most common:

  • Outdated information? Instead, have a live connection to your cloud accounting software. Who wants to bother with manually updating figures every week, month or quarter? With a live connection at your fingertips, your board are fully informed of the finances, you have the data at hand with which to answer any unforeseen questions,  and there is minimal additional stress put on you.
  • Text-heavy reports? When faced with reams and reams of lengthy reports, it’s all too easy for members to switch off, or worse still, to not fully grasp what the information is telling them. By using a few simple illustrated graphs and charts, figures can be presented clearly, accurately, and comparisons can be drawn far quicker. Easily digested content is the way forward.
  • One-sided analysis? It is essential that your report includes all areas of the business, not just those in which you are performing well in. Without understanding, or even knowing about, the good, the bad and the ugly, how can Board members be expected to make the right decisions for the future of the company? The truth will always out, usually with the downfall of the company, so be sure to present all facts and figures as thoroughly as possible.
  • Lack of consistency? Board members need to be able to draw comparisons with past performance, as well as be reminded of set objectives to see how the overall company is faring. If there is no follow up from one report to another, there are no means with which to track progress.
  • No clear set agenda? There is nothing more frustrating for time-pushed board members than being presented with a report that has no clear direction or strategy. Outline the points that need to be discussed, and take responsibility for the report itself. After all, it is a direct reflection of your work and ability to achieve in your role.
  • Lack of preparation? If important numbers are only being prepared hours before a board meeting, and not shared in advance with those who need to have an opinion on them, then the meeting itself won’t be as productive as it could be if everyone has had time to digest the figures and gain an understanding of the company’s positioning. Ambushing your board members doesn’t benefit anyone.

What are the main financial areas of reporting?

For financial performance, comparing what happens (actual) with what should have happened (budget/plan/rolling forecast), or in some cases what did happen previously (last month/quarter/year), will be valuable.

Presenting a forecast year-end position will focus minds on the effectiveness of an organisation, rather than just its economy and efficiency. Drawing a comparison with your business budget should be one of the key management tools, but the emphasis should be on the future, which can be influenced, rather than the past, which cannot.

Whether it be looking to the future using scenarios and what-if analyses, a quarterly update of forecast results for the trading year, including a cash flow forecast, or a further breakdown of departmental results and how they relate to the overall performance of the company, the quality of performance reporting to boards is one of the key factors affecting companies’ competitiveness in business today.