Performance Reporting Checklist: 5 Questions for Finance Teams
Performance reporting and financial reporting are both critical to a company's success. However, they tell two very different tales of compliance versus performance.
While financial reporting is a function of being accountable to external parties, such as the SEC, industry regulators, and investors, performance reporting is largely an inside endeavor. Executives and finance teams determine their own makeup of a performance report, based on handpicked metrics that they find most useful for measuring profitability and positioning. The end result is an internal report that can—and should—vary wildly from the cut and dried requirements of a traditional financial report.
Performance reports take the form of a comprehensive report card on the condition of the company, delivering influential data to decision-makers. Sometimes referred to as management reports, they are delivered directly to executives, board members, and the C-suite.
What to include in a performance report
Often a mosaic made up of multiple aspects of business, performance reports combine accounting, finance, operations, and strategic initiatives. They include historical evidence and future outlook, as well as recommendations and rationale. This presents an opportunity for finance to add its analytical layer, with the report serving as the output of financial planning and analysis (FP&A).
Due to the proprietary nature of corporate goal-setting, no two companies' reports are alike. However, there are some common guidelines that should drive the corporate reporting process. Here are five questions to ask before you present your next performance report.
1. Are you 100% confident in your data?
First things first: accuracy is everything. No matter how robust your report, no matter how stunning your support materials, a wrong number will be the only thing your CEO remembers. It could derail a presentation. It could lead to difficult questions. It could set a bad precedent for future reviews.
Create an environment that thrives on accuracy. Avoid the common traps of data inconsistencies: passing around multiple versions of documents, lacking an audit trail of changes, relying on too many contributors. When numbers update, do they change across documents without the need to manually reenter and reformat? Do your charts and graphs update in real time? The more manual your processes, the greater the risk of error.
Takeaway Tip: Develop a single source of truth policy. Work with a reliable set of data, and limit access to specific content based on roles and responsibilities.
2. Are you including too much data?
With data available from across your general ledger software, CRMs, ERMs, and other tools, you may be tempted to share every detail with your stakeholders. Cut down on excess, and focus on key performance indicators (KPIs) you can actually use. The goal should be to inform, not overwhelm. Corporate performance reports bloated with metrics create confusion and waste time—from creation to presentation.
Author Patrick Lencioni said it best: “If everything is important, then nothing is.” Award-winning directors and five-star chefs know the importance of editing. It should be no different with your own reports. Find the right balance of GAAP measures and nonfinancial KPIs. Focus on a few key categories that have the most impact, are easy to define, and have potential for change from report to report. If it is not critical to decision-making, it could dilute your intended takeaways.
Takeaway Tip: If you identify KPIs that do not fit in your report but have some significance, include an appendix or schedule a follow-up meeting with specific stakeholders to cover that area of business.
3. Are you adding insight?
While accounting specializes in reconciling a financial track record for a given period of time, finance's real strength comes from its ability to add narrative to the numbers and support future decisions with actionable data.
Think of performance reporting as financial storytelling. You can present both how you got to this point, and where, in your expert opinion, the path will take you next. Provide your perspective on why the numbers turned out the way they did and how you can adjust the course for the next quarter.
Takeaway Tip: Align your insights with specific business objectives and strategies for the year or quarter.
4. Are you telling the right story to the right people?
Know your audience. Who is most invested in your report? What decisions will be made with this information? How do they prefer to consume information?
Once you have identified your audience, be sure to craft a financial story that speaks their language:
- Use visuals for immediate impact. Data visualization, including charts, graphs, and infographics, are a shortcut to explaining rows and rows of numbers.
- Supply narrative. Finance is uniquely qualified to provide commentary on different datasets. You have greater transparency into more areas of the company than most of your coworkers. Take this opportunity to share your perspective.
- Tell the whole story. Highlight progress and positive momentum, but do not leave out bad news. Include areas of improvement as needed.
Takeaway Tip: Listen to your audience, and make adjustments to the content and format based on feedback, follow-up questions, and engagement levels.
5. Are you doing too much manual work?
Like financial reports, performance reports must adhere to a schedule. In this case, timing is determined by internal stakeholders, via monthly executive reviews or quarterly board meetings. Invest in technology that supports a repeatable process, and develop a template that you can easily populate with current data. Leverage productivity tools that will allow you to automate tasks and a reporting solution that blends structured and unstructured data. Finally, look into cloud platforms that enable everyone to work from the same set of data, without resorting to multiple spreadsheets and email communications that slow the review period.
Takeaway Tip: During your next report, record the time spent, the number of microprocesses, and the number of contributors or contacts involved during the process.
Bonus Question: Are you ready for your next performance report?
In your current reporting process, can you roll forward to easily create the next quarter's report on the fly? If a stakeholder makes a request for an ad hoc report, how fast can you turn it around? Can you quickly—and cleanly—pull structured data from known databases and unstructured data from emails, webpages, word processing docs, and other sources together into a single presentation? If you answered "no" to any of these questions, you may want to look at analyst reports comparing performance reporting solutions that provide these capabilities.
Define the steps you need to simplify a sustainable reporting process. Corporate agility is dependent upon how quickly you can access information and present it in a consumable, actionable way. The faster you can develop a report, the faster you can react to competitive shifts or marketplace opportunities.
Discover additional best practices
Performance reporting is an opportunity for the office of finance to expand its strategic role. Business leaders turn to finance for big-picture reporting and expect value-added analysis with recommendations from the experts within the company.
For more in-depth information and examples on how you can optimize your performance reporting, read this CFO.com white paper, Amplify the Value of Performance Reporting.