Impact Financial Reporting

Dispatches - the case for Effective Financial Reporting

01

Don't be Cheap on the Projections!

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You make a presentation to potential investors.  At the end of the presentation you are asked for a break-down of one of the figures that you stated during the presentation and you tell them that you will send it later that day.  Back at the office you look at the file and can’t figure out the break-down, and then you realize that the number itself cannot be correct. Now you must tell the potential investor that you made a mistake (a big one, of course).  It all goes back to the design of the projection file and the willingness to spend extra time in the preparation stage so that you can confidently make statements later on.

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People use all sorts of formats for projections.  It’s interesting that we suffice with receiving profit and loss information with a smattering of cash-flow numbers. An effective projection comes from a detailed worksheet which includes comprehensive financial statement information (balance sheet, profit and loss, change in equity, cash flow statement and detailed notes) which serves as a single detailed database for all the presentation sheets.

The Worksheet page should be built by month, since that is the way that we live our lives, and each corporate entity should be built separately – Excel has no shortage of space.  The amounts are then consolidated and then summarized by quarter and in thousands of dollars. 

The Worksheet creates One Source of Truth that allows confident preparation of the presentation pages.  Integrity with stakeholders is built through providing consistent and compelling information and showing that you have solid control over the numbers and process.

Do it once and do it right through building the right kind of projections.

02

Effective financial reporting is like a clean kitchen

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You are the first one up and you get ready for the morning rush to get the kids out.  You walk into the kitchen and sigh as you look around.  The sink is full of dishes.  The counters are piled high and sticky.  There is the pot of soup that never made it back to the refrigerator last night.  The pain of knowing that the morning rush will be extra pressured for everyone – no clean silverware, no space to prepare sandwiches for lunch, and that is before the last-minute crisis that is bound to pop up.

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A little pushing the night before and it might have all been different.  Making sure that the kitchen was clean, and doing it at a non-pressured time, would have meant a much nicer morning for everyone.  Doing the job right (all the way down to the counters) creates a pleasant sense of space that will be felt by all during the morning rush.  A clean kitchen creates visibility, clarity, simplicity and a positive feeling.

Effective financial reporting is much the same.  Reporting should be prepared on a regular basis, and during low-pressure periods, so that financial data is available, consistent, and trusted.  This supports an effective decision-making process, avoids unpleasant surprises and builds integrity with stakeholders. 

A dirty kitchen creates a crisis environment that never seems to end.  A clean kitchen is win-win and well worth the effort!

03

Oh...the dread of it!

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Here we go again.  You are in a meeting and someone presents numbers that are not properly or fully prepared.  The calculation should have been straightforward, but the presentation is not and within a few minutes someone is at the whiteboard re-doing the numbers, along with everyone’s input.  All that time and the cost of all those people, and then you never really finish the calculation and you don’t get to the rest of the items on the agenda.

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Defining a deliverable is important but more important is the follow-through and proper approach of the preparer.  It is not enough for the preparer to understand the information, the point is for the user to easily understand the numbers and the statement that the preparer is trying to make, and the presentation of that point needs to be made in a clear and concise manner.  This typically requires the preparer to spend a lot of time in preparation so that the presentation is simple, and that is the job of the preparer! 

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We accept less than a full job in the reports that we receive and that leads to an unnecessary use of resources.  Why not do it better?

04

It's old school, but it works!

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In our age of soundbites, Powerpoint is king, but for financial reporting purposes, it often defeats the purpose of effective communication.  A Powerpoint presentation assumes that I am there to explain each slide (and, of course, each slide should not be more than 6 lines long or 6 words on each line, depending on which rule of PowerPoint you use).

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I typically prepare information in Excel and when needed I also prepare a Powerpoint presentation for high-level purposes.  An important document that I prepare along with projections or a related process is a memo written in Word (and sent as a pdf).  I write the memo so that the reader can understand the main points on their own – today and at any time in the future.  The memo format allows me to make my points in text and to add in tables and graphs from Excel. 

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People who want to gain a deep understanding of the issues at hand will read the memo, and they will appreciate a comprehensive (yet concise) summary of the main points being presented.  Powerpoint has positive attributes, but it does not replace a well-written memo (even when the Powerpoint deck has 86 slides, and who really wants to go through 86 slides!)