Elevate Your Financial Reporting Part 1: Deliver ‘Best-In-Class’

The finance team not only plays a pivotal role in gathering and validating data, but it can also help consumers identify critical areas for attention by providing precise and understandable reports.

This three-part series of articles looks at financial reporting and how to take it to another level. In part one, we look at why so many finance teams struggle to deliver ‘best-in-class’ reporting.

Problems at the coalface

I worked in the industry for over ten years for various companies, as both a financial controller and CFO. During this time, I have been responsible for developing processes and delivering reporting packs, and as a report consumer and strategist. When I speak to young finance professionals today, many of the issues and frustrations that I encountered at the coalface then still exist today.

Challenge one: data

There are various aspects of data that can require attention. The first is one of access at the right granularity level, in the correct format, at the right time. Concerning granularity, we are often reliant upon underlying transactional systems, such as ERPs, that may impose limitations. It could be due to a lack of functionality or poor configuration.

In the case of the latter, this could be addressed with a simple re-design e.g. adding in additional cost codes to an ERP to enable more detailed analysis. If it is a lack of functionality, an upgrade to a newer version may solve the problem. If that doesn’t solve it, then a costly re-development or a new system may be required.

The same argument applies to the formatting of data. Transactional systems are built for transactional efficiency and not reporting ability, meaning that there may need to be a re-structuring of the data for reporting. Without this transformation, reporting can be cumbersome.

The final point is about the timeliness of data. What we should try to achieve as a finance team is self-sufficiency, thus avoiding reliance upon your IT department. In years gone by, technology was a limiting factor. However, given technology advances and the plethora of reporting software available today, this should no longer be the case. Gary Crawford, COO of software provider XLCubed says: “Where you talk about self-sufficiency, the finance team needs to be in a position not just to change or create reports themselves, but also to do it at speed. Agility is key to timeliness.”

The second aspect that comes into play, especially with self-sufficiency, is one of data consistency and governance. One way of achieving this is to have a single data source, which means everyone is looking at the same core data.

Challenge two: defining what to report on

This is the single most frustrating issue that I faced in industry. There is an on-going reluctance to change the status quo, or even to challenge it. Multiple page reports are churned out month after month with no discussion as to whether they are meeting their objectives. Is the information being produced relevant? Is it even being read by the recipients?

The main objective for any report is that it provides relevant information to identify issues so that you can take action. If a report does not meet this simple definition, it should not be produced. The finance team is busy enough without consuming time on reports that do not yield any action.

Challenge three: turning data into information

How many times have you seen a monthly report book that contains numbers with no narrative? Often, this can be due to a lack of time in the reporting cycle.

Once we define what to report on, we need to find the relevant data and turn it into useable information. Extracting the right data should be a mechanical process; the crucial step is where the finance team can use their knowledge to add value.

Challenge four: reporting presentation and consistency

The final step is deciding how to present the information. We are now seeing more finance teams using visualisations and graphical displays as well as data to help them tell the story behind the numbers.

However, whatever approach you take, there needs to be some consistency of presentation, not just within individual reports but across the organisation as a whole. This helps the report consumer identify and focus on the key issues. Inconsistencies can result in misleading or incorrect conclusions.

How can the finance team address these issues?

Critically, the finance team need to ensure they take ownership of, and responsibility for, the reporting process and make it ‘best-in-class’. There are elements that will require collaboration with others, but finance should initiate the conversation.

For instance, we may need the initial assistance of the IT team to identify and connect to data sources; however, beyond this, we should look to be self-sufficient. We have suffered in the past with reporting solutions such as business intelligence. We were able to access data but required a high level of technical help to change or develop what was delivered. We have seen examples finance teams taking data out of reporting solutions into Excel to be analysed or re-formatted, a process that is both non-sensical and time-consuming.

Beyond the data, we need to look at what you currently produce and the objectives of the report. Who is it for? Is the content relevant? Could it be presented better? What actions do you take as a result?

If we want to meet our objectives to elevate the finance team to the level of strategist, we should not be afraid to ask questions, challenge the responses and provide guidance where necessary.

There are so many reasons to strive for best-in-class financial reporting, and yet so many finance teams struggle. However, issues are under our control, meaning that it is within our hands to address the challenges and elevate the process to another level.

IN PART TWO OF THIS SERIES, WE WILL LOOK AT THE ROLE OF EXCEL IN REPORTING – THE PROS AND CONS OF THE DEBATE. IN PART THREE, FIND PRACTICAL STEPS TO IMPROVE YOUR REPORTING.