Preparing an effective Board of Directors’ report takes a lot of hard work, not just for you, but for the members of your team and other stakeholders who must gather information for the presentation. It’s critical the information is accurate, highlights the important aspects of the organization in an engaging way and presents all the information the Board needs to provide good governance. Here are some tips for preparing a high-quality Board of Directors’ report:
Build a Strong Reporting Process
Board reporting is a collaborative process, which requires tight coordination across all functions within the Organization: Operations, HR, Legal and, of course, Accounting and Finance. Stakeholders on the production side of the process should organize around what materials each team will be integrating into the presentation and identify dependencies and handoffs. Set clear deadlines and schedule check-ins to assure timely delivery.
In large organizations, the Office of the CEO or General Counsel will lead the information-gathering process for board reporting, but it is not uncommon for the Accounting and Finance function, led by the CFO, to be tasked with pulling the materials together. The CFO’s team will then need to build and maintain strong relationships across key functions of the organization to assist in creating the final Board of Directors’ report. This often begins once the Board meeting date is set, and the team works backwards to create deadlines (e.g., closing the books, reporting results, providing analysis and commentary) and identify dependencies. Once those inputs and sources are identified, tools (e.g., Excel) can be used to track incoming data and exhibits that are included in the final product.
Create a Board Meeting Template
Invest some time developing a standard template to use for Board reports. This will save you time when preparing future reports, and it also helps the Board become familiar with how important information is are structured in the board report.
An example Board of Directors’ Report Template might include sections for:
- Strategic Performance
- Financial Performance
- Risk Strategy
- Sales Activities
- People Management
- Committee Report (e.g., Audit, Compensation, etc.)
Each of these sections should include standardized information and/or key performance indicators relevant to that function and important for communicating the current state of the business and recent trends. This information can be customized by industry.
Know Your Audience
Knowing the Board, their expertise and areas of focus will help you prepare a clear and concise report, saving you from writing over their heads or explaining things they already know. For example, if the Board doesn’t know industry-specific metrics, you may need to devote more time to an explanation in the report, so they can make informed decisions. You should also use language all Board Members can understand.
Help the Board Understand the Report
The Board of Directors’ report is a team effort between department heads and committees. Lean on these stakeholders to help provide content for your report in easy-to-understand language and terms. Your introduction should be a clear and concise summary of what the Board should expect to glean from the report. In early-stage companies, it can be helpful to include Defined Terms in an exhibit or include additional context for the information in each section.
Provide Solid Financials
The Board of Directors’ report almost always contains financial information and current conditions of the industry. Make sure summary financial data, variance analysis and Key Performance Indicators (KPIs) are included, and put in proper context of overall market conditions, life cycle of the business and the industry. For example, in a SaaS business, Monthly Recurring Revenue (MRR), Customer Acquisition Costs (CAC) and Customer Lifetime Value (CLV) are common KPIs, while a service organization may focus on Resource Utilization Rates, Annual Recurring Revenue (ARR) and Annual Revenue per Team Member. Whatever KPIs are chosen, they should:
- Be a measurable value (and a target to compare against)
- Have a standardized timeline and reporting frequency
- Have a consistent data source within the organization
- Signal operational responsibility within the organization
Additional detailed financial data may also be included as exhibits in the appendix if Board Members want to drill down even further.
Communicate Both Positives and Negatives
Effective Board reporting requires transparency, so present facts in context, even when it’s bad news. There are always two sides to any decision. Providing both the positives and negatives of a situation will help the Board make a complete and informed decision.
Breaking up the text with visuals is the best way to highlight key information. It also keeps the Board of Directors’ report engaging and more likely to be read. You can break up the text using pictures, tables, pie charts, graphs and even bullet points.
Use Automation to Help Manage Workflow
Leveraging technology wherever practical can be an essential to an efficient reporting process. Using Board Management software allows you to create the Board of Directors’ report and, if necessary, make any changes to the report prior to the meeting without having to print out additional hard copies or addendums. Using Board Management software also allows the Board to ask questions and interact with each other by making notes online. OnBoard, Diligent and Zeck are examples of Board Management software, and Workiva can also be used to collect and manage Board Reporting materials.
Give the Board Time
As noted previously, Board Members typically juggle many responsibilities. Giving them a day or two to read, digest and form questions about the report is usually not enough time. Board meeting experts suggest providing a digital report at least a week in advance of the meeting.
Don’ts – Avoid These At All Costs
There are two items you should avoid for your Board of Directors’ report to be impactful:
- Don’t make it hard to read. Make sure the information is broken up with a good balance of visuals and bullet points to highlight key points, while making sure the presentation doesn’t become “too busy.”
- Don’t forget to budget time for internal review by executive and legal teams. These final reviews can help ensure that the document presents a complete, accurate and cohesive narrative for the Board.
Get Support for Your Board of Directors’ Report
If you’d like support with building or optimizing your approach to a Board of Directors’ report, we can help. Our team of 100+ finance and accounting Consultants are at the ready to support your team and operational objectives. We invite you to contact us to start a conversation.
To learn about ways to improve your financial reporting and accounting function, download our free ebook! It offers insight into how teams can approach improving internal processes for greater efficiency and effectiveness:
About the Author
Mark has more than 20 years of diverse financial and operational leadership experience, including positions as CFO and Corporate Controller of several mid-market firms in the Fin-Tech, Brokerage and Investment Management industries. Mark was the CFO of Rustic Canyon Partners, where he developed a budgeting process, implemented controls, policies and procedures, and was instrumental in the implementation of several cloud-based infrastructure initiatives. Mark began his career in public accounting at Ernst & Young and KPMG, where he focused on Investment Services and Insurance clients. Mark holds bachelor’s degrees in both Accounting and Finance from Loyola Marymount University.
Categorized in: Financial Reporting & Accounting