Effective financial reporting processes and modern financial reporting software are changing the way CFOs and FP&A teams approach a critical component of financial control.
Every time a business releases a new product or service, adds a department, invests or divests from other companies, or really makes any decision at all, that has financial consequences for your business. Financial reporting and management is the mechanism through which you can track how each decision impacts your business. It’s a way for the CFO to communicate to the board and other executives the financial state and health of the business - a way to tell the story of the company’s finances, so to speak.
Done correctly, financial data contained in these reports can be analyzed in order to determine what’s working (i.e. ought to be replicated) and what’s not (i.e. what needs to be jettisoned).
Despite massive advancements in financial reporting software, financial reporting continues to fall short in terms of accuracy (especially for public companies) as well as utility for many companies and their business operations.
This isn’t a problem with financial reporting - this is a problem with how companies are crafting and using these financial reports.
To that end, we’re going to look at how best to execute modern financial reporting and examine some distinct forms of reporting, including:
- Management reporting + board reporting
- Dashboard reporting/personalization
- Ad hoc reporting
Why Financial Control Is Critical to Business Growth
“Going with your gut” just isn’t going to cut it - successful modern businesses are powered by data. With so much information available at our fingertips, not leveraging financial data as a means to inform future, high value decisions makes it a disservice to your business and to your role as CFO.
The best CFOs are far more than accountants and ledger keepers - they’re strategic business partners that analyze financial data in sophisticated and innovative ways in order to discover opportunities - and threats - to the business. In this role, you have the power to shape the future of your company and potentially be among the biggest drivers of growth and value.
This is reflected in how CEOs view the CFO role moving forward - one survey of CEOs by IBM revealed that CEOs believe the CFO role to be the most crucial role in their organizations in the next two to three years.
Modern CFOs are expected to help partners, department heads, finance teams, and other stakeholders make the right decisions regarding resource allocation, product launches, investments, etc.
Balance sheets and opex are the basics - strategic finance is the future. This allows you to do more than report on financial positioning, document profits and losses, provide statements of cash flows, etc. - instead, you can create reports that spot trends, provide deep insights into business performance of specific investments and departments, and allow for decisions based on data that drive growth and value.
And the only way to become that strategic business partner is to refine the financial reporting process.
The Future of Financial Reporting and Financial Reporting Software
The primary objective of financial reporting is to provide information to relevant stakeholders. But the problem is that there is so much data now to be mined that analog and outdated processes just aren’t able to handle the information deluge.
The good news is that financial reporting software and financial reporting tools (alongside more refined processes) are more than equal to the task of managing this data overflow, collating it, organizing it, and granting FP&A professionals the time and functionality necessary to perform deep, holistic analyses.
For too long, the process of performing financial planning and analysis in order to flesh out financial reports has been slow and tedious. Hell, even with the advent of advanced processes and technology, McKinsey found that FP&A takes about 10% longer than it did a decade ago.
A lot of that is due to the fact that too many CFOs and their finance teams are spending too much time on day-to-day reporting, scouring spreadsheets and dealing with Excel. Worse yet, this wasted time prevents them from being able to perform the in-depth analysis which in turn drives real value.
AI for FP&A, reporting tools, and automated reporting are dramatically expediting the reporting process. By allowing users to manipulate data with ease or even perform novel analyses in the case of AI, these FP&A technologies empower CFOs and their teams to reach the next level.
What’s more, these same FP&A technologies enable finance teams to slice and dice their data in myriad ways enabling faster reporting, deeper analysis, and perhaps one of the biggest drivers of value: accurate forecasting. There's even opportunity to leverage software tailored to integrate with a specific ERP - (i.e. NetSuite FP&A software, Sage Intacct FP&A software). Learn more about Sage Intacct integrations and NetSuite integrations.
Future-Facing Insights Vs Ledger Keeping
Rather than just report straight numbers (what happened, or descriptive analytics), the most shallow layer of financial is being bolstered by diagnostic analytics(why the numbers turned out the way they did), predictive analytics (projecting what future data will look like using historical data and trend mapping) and prescriptive analytics (insights into actions you can take to bring about positive results).
This is far more valuable - and more interesting - than simply reporting financial statements.
These are real insights that can turn the decision-making process into a data-driven decision making process.
Some forecasting functionality includes:
- Revenue forecasting
- Risk management (especially critical in the age of inflation and interest rates)
- Cash flow forecasting (especially useful with multiple, data-focused funding streams, such as government organizations, NGOs, non-profits, VCs, etc.)
- Workforce planning and headcount planning (forecast the impact of raises, hires, promotions, benefits packages, etc.)
- Capital expenditures forecasts that demonstrate the value of an investment, whether to hold off, divest, etc.
I’m sure you can see how coming into a quarterly meeting with all these analyses completed and ready to be presented to stakeholders is a massive evolution on the traditional financial reporting that simply reveals what transpired in the quarter or fiscal year.
AI for FP&A - It's Coming, Here's How to Prepare
One of the biggest and most exciting changes in FP&A technology comes from AI. It’s safe to say that pretty much every industry is excited about the possibilities of AI, but FP&A teams should be particularly happy about what AI can bring to the table.
See here for our recent writings on all the AI innovations coming down the pike:
To put it succinctly, AI will be able to help you perform those aforementioned in-depth analytics by automating a lot of the FP&A gruntwork (think data validation, combing through spreadsheets, performing calculations, etc.) as well as become an analyst in its own right, able to detect patterns, anomalies, and other interesting trends in your data that humans can’t.
Again, these insights can be leveraged to help you become a true finance business partner, able to advise your business on all manner of decisions from forecasting productivity of new hires to determining the value of investing in one department location over another to when to launch a product to induce maximum sales.
AI is just beginning to make waves in the FP&A world, and the best thing you can do is to prepare your organization and team members so that when it does reach its full potential, you’re able to immediately take advantage of the power of this new technology.
And the best way to ensure your preparedness for this coming tech revolution is to hone your current financial reporting processes with tried-and-true financial reporting tools available on the market today.
To that end, let’s talk about:
- Board reporting and board reporting software
- Dashboard reporting and dashboard reporting software
- Ad hoc reporting and ad hoc reporting software
Board / Management Reporting + Management Reporting Software
Management reporting is critical to helping executives and directors make the appropriate decisions that will drive business growth.
Board reporting can yield a number of critical insights, including:
- Demonstrating how the company is performing against its budget to help determine next steps, moves that need to be made, financial health of the company, etc.
- Reveal the status of a project and its costs, helping determine if it should be canceled or continued
- The projected value of a project, helping to determine whether to invest
- Details on metrics and key performance indicators (KPIs) across the company - marketing, sales, operations, logistics, HR, etc. - helping determine where best to invest with the marketing team to derive the biggest yield
Board reporting is often held back, however, by some common issues, such as:
- Reports are overwritten and overdetailed, failing to highlight the important insights
- They lack action plans and next steps, leaving the board uncertain with how to utilize the data
- Late reports, so by the time the numbers are presented, they’re already out of date
Board reporting is at its best when it leads with clear insights into the data, has strong, data-backed recommendations, and uses data that’s current and still applicable.
Too often these reports become lagging summaries - showing what happened several weeks or even months ago. Considering how fast economic situations are evolving (interest rates, geopolitics, supply chain shifts, etc.) these numbers can tell the story of an entirely different economic environment.
By leveraging management reporting software solutions and technology, you can avoid many of the above pitfalls.
Automation ensures that a report is never late, for instance. Your FP&A software can draw information directly from your ERP and other systems, plugging data directly into your reports and performing calculations automatically.
This extra time provides you with the time you need to perform those deep-dive analyses we’ve been talking about.
What’s more, you’ll be able to pull data in real time from your ERP, so you won’t have to worry about the numbers being out of date by the time they reach the board.
Dashboard Reporting + Dashboard Reporting Tools
A dashboard reporting tool will pull data from multiple sources and present them in a single, personalized dashboard that you can manipulate to build reports that have all the data/information you need.
Not only does data visualization make financial reporting more effective (graphs, charts, etc. are easier to digest than row after row of numbers) but it also presents a dynamic view of your data.
This in turn can help you, the finance professional, digest the information and develop insights into the data. Visual data, in other words, can make it easier to understand what’s being presented (an issue with board reporting).
The best part about dashboard reporting tools is that they can be used on a variety of departments and revenue streams, so you can navigate to and build specific reports, faster.
The best dashboard reporting software is also designed to be user-friendly. That means that you can develop aesthetically pleasing and easy-to-understand dashboards with a few clicks of your mouse - without needing to bring in designers or tech wizards.
Couple the intuitiveness of personalized dashboards with the ability to customize them by date, department, revenue stream, calculations, locations, etc., and you can see how these dashboards are critical to leveling up your FP&A process.
Ad Hoc Reporting + Ad Hoc Reporting Software
You’re probably familiar with the other two reporting tools/types, but one financial reporting tool you may not be as familiar with is ad hoc reporting.
Ad hoc reporting is about building reports outside of predetermined periods (like quarterly or annual meetings). These reports are created on the fly, so to speak, and sometimes are critical elements of an emergency response to a critical business development.
For instance, imagine your business owns a factory with an assembly line. Now imagine that the assembly line breaks down - this is a massive drain on your business, with every minute of downtime costing you potentially dozens of thousands of dollars (automotive manufacturers, for instance, lose about $22,000 per minute of downtime, and 82% of companies experienced unplanned downtime over a three year span in one study, speaking to its pervasiveness).
Now, with the assembly line down, your business is faced with a plethora of options. You could replace the machinery, upgrade it, shutter the factory and cut your losses, put in a temporary bridge fix while newer machinery is installed . . .
Going with any one of these decisions can have significant financial consequences, and therefore these decisions ought not be taken lightly. That said, time is of the essence. That’s where ad hoc reporting is critical.
You’ll be able to generate reports in minutes. Imagine being in a meeting and the CEO asks for data on investing in the New York office but it’s not in your report - you can respond with accurate forecasting data in that same meeting. This ad hoc report can analyze the consequences of any discrete action (including forecasting and projecting the total costs and returns) so you’re empowered with the data necessary to make the best financial decision. Ad hoc reporting tools let you do just that.
By leveraging ad hoc reporting software and developing an ad hoc reporting internal process, you can ensure that your business is ready to respond to these high-stress situations with hard data that can inform decision makers on the best course of action.
Ad hoc reporting also helps with, say, creating supplements to your typical reporting. For instance, should the board want a specific, in-depth report on how inflation can impact revenue streams in the coming quarter, ad hoc reporting would allow you to build that report rapidly, ensuring that the board/relevant stakeholders have all the necessary information they need to make sound financial decisions.
One of the major benefits of ad hoc reporting, then, is that it delivers specific reports on truncated timelines, allowing you to meet all demands of other executives and the board.
The only way to achieve accurate ad hoc reporting is via ad hoc reporting software that makes it easy to pull data from all relevant sources, automate calculations, and perform other tasks that allow you to quickly gather the relevant data and analyze it.
Taking Your Financial Reporting to the Next Level with Leading Financial Reporting Software
When businesses hear ‘cloud FP&A’, they think ‘Excel in the cloud’ and think that’s all they want.
But the simple fact is that in order to reach your full potential as CFO, you need to build out a robust FP&A process that automates mindless data gathering and validation processes, performs calculations automatically, and otherwise gets rid of the spreadsheet wrangling part of the job.
That way, you’re able to analyze the data and improve your ability to develop long-term, accurate forecasts that can be a game changer for your business.
Couple the above mentioned processes with modern financial reporting software that has embedded analytics tools for forecasting built in, you can put out fires, solve systemic problems, and be a real growth-driver at your business with data-backed decision making.
Data analysis has never been so easy.
The future of financial reporting is about saving time for business leaders while providing more detailed and accurate reports, faster.