Financial Planning and Analysis

Time for a Refresh: Ways to Improve Financial Reporting

Even the most well-conceived financial reporting packages tend not to age well, which leads many companies to look for easy ways to improve financial reporting. A formal project centered on revisiting and refreshing financial reporting can result in better insights and decreased turnaround times.

Financial reporting – whether monthly, quarterly or annually – is a critical deliverable for all companies. Board members, executives and department leaders all want to understand how a company’s actual performance compares relative to forecasts and prior periods. Accounting and FP&A teams work frantically at the end of each reporting period to deliver their version of a reporting package – a package likely designed years prior and subsequently tweaked, altered, amended and updated.

Perhaps this sounds like your organization’s reporting package. (Or maybe not, and your firm’s reporting is delivering just the right insights and intended information.) But many companies have a reporting package that… leaves a lot to be desired. That often manifests in these observable symptoms:

  • Too Much Information vs. Not Enough Information: Irrelevant metrics are shown. Would-be-nice-to-know KPIs don’t surface.
  • Longer Time to Delivery: As the complexity of reporting packages increases and tweaks are added, they take longer for finance teams to prepare, delaying the delivery of the final reporting package deliverable.

If you’re looking for ways to improve financial reporting in your organization, let me suggest a few important areas to explore:

1. KPI Identification and Rationalization

Key Performance Indicators (KPIs) are the handful of most highly relevant metrics leadership uses to evaluate the performance of a business. Over time, many reporting packages tend to grow the number (count) of KPIs in response to requests from business leaders. However, KPIs tend not to be removed or eliminated from financial reporting. That means that teams might be reporting on 2x or 3x as many critical metrics as compared to when the reports were designed.

When everything is a priority – nothing is a priority. It is tremendously important to take time to understand what the truly critical, key metrics are to the business. While it can be difficult to pare down a list of 20-something metrics around revenue growth (for example), having fewer KPIs can often make for a more powerful and useful way to look at performance.

Want to learn more about KPIs? Read these related blog posts:

2. End User Analysis – Understanding Which Groups Need Which Data or Insights

To ensure the reporting has the right KPIs for your organization, and that the financial reporting package is most useful, the end users of the reporting must be consulted. First, identify the relevant parties (e.g., Board, CEO, Executives, Department Leads). Second, understand what aspects of the report each party looks at. Often, after thoroughly investigating how the reporting package is being consumed, you’ll discover entire sections that are essentially never reviewed. You’ll also identify other portions that are frequently referenced and perhaps deserving of a deeper dive or expansion.

Some questions to ask:

  • When relevant parties first receive the reporting packages, what do they look at first?
  • What data do they reference most often?
  • What insights are they looking for on a monthly, quarterly or annual basis?

Conversations with the relevant consumers of the reporting package will give insight into what KPIs should be set, what level of detail is most useful, what areas of the package are overkill and what areas might deserve more attention.

3. GL Review – Identifying the Right Buckets

Financial reporting packages take highly detailed accounting data and attempt to present it in useful format for the end user. Often this means collapsing (or bucketing) multiple lines into a single line. A common example is T&E expenses. While the accounting ledger might have separate accounts for flights, meals, hotels and ridesharing, the financial reporting might group all of this under one line: T&E. However, each company is different, so we should consider how we approach bucketing on a company-by-company basis. For some companies, we’d want to show the detailed below the general level of T&E, for example.

Learn more about T&E systems in this related blog post:Concur & Expense Management Systems: From the Implementation Trenches”

Similar to KPIs, grouping or bucketing logic will shift over time. What was not relevant years ago might be relevant today. Stepping through the P&L line by line will reveal areas where the data presented is too high level (i.e., too aggregated), and should be broken out at a lower level. The converse may apply as well: too detailed a view could be irrelevant and/or distracting, and multiple lines might be consolidated.

4. Data Scrubbing – Eliminate Manual Adjustments and Make Data More Accessible

End users of the financial reporting package won’t necessarily care about underlying data. They typically just want the numbers to be “right.” For accounting and finance teams, the underlying data (and integrity of this data) is paramount to being able to deliver accurate figures. It’s crucial to understand the adjustments, tweaks and fixes that are required to get data out of the various systems (e.g., ERP, HRIS, CRM) and into the final, presentable format.

Are there adjustments made in the preparation of the reporting package that can be pushed into the ERP system, eliminating the need for manual adjustments in future periods? While seemingly mundane, simple items, like consistent department-naming conventions across systems and accurate employee/department mapping, make financial reporting faster and more accurate.

Additionally, taking the time and effort to eliminate manual adjustments and cleanup of underlying data within databases (and across databases) vastly improves the quality of not just reporting, but also analysis. Many former clients became frustrated when they implemented cutting-edge data visualization software only to find out that underlying data issues require manual intervention from the finance team for virtually all reporting.

Let Us Help You Find Ways to Improve Financial Reporting

Looking for ways to improve financial reporting and optimize the overall reporting package is tremendously important, yet never the most urgent issue. It is perhaps a task that is perpetually being deferred until next month or next quarter. Accounting and finance teams have full plates and a dedicated effort to assess and revamp financial reporting is put on the backburner.

8020 Consulting has a team of 90+ finance and accounting professionals that can deploy on a project basis – either in an Interim Management capacity or to project manage key Analytical or Finance projects. Learn more about our financial planning and analysis services or contact us directly if you’d like to explore working together!

You might also be interested in our guide to improving your month-end close process:

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About the Author

Mitch has over 13 years of finance and systems experience across entertainment, engineering, and technology industries in both private and public companies. As a consultant, Mitch has advised on M&A and capital raise projects, provided post-merger integration services, created budgeting and forecasting models, and performed financial system implementations including NetSuite and Tableau. Prior to 8020 Consulting, Mitch worked at AECOM, Hulu, and Yahoo where he served in both corporate finance and corporate development capacities. Mitch began his career as an investment banker at Wells Fargo Securities, providing investment banking services to middle market clients. Mitch completed his undergraduate work at Claremont McKenna College and earned his MBA from Washington State University.

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