Clear, concise and regular reporting of financial information to all the internal stakeholders of your business is a vital, yet often overlooked, component of long-term business success. These internal stakeholders can include your management team and board of directors.
Financial Reports: The Roadmap to Reaching Your Destination
When taking a family road trip, one of the first things you do is use a map to layout the journey, locate markers along the way, identify where the destination is and how long it will take to get there. Clear, concise and timely reporting of usable financial information to internal stakeholders operates like a roadmap, but for your business.
When putting together this “roadmap” for your business and communicating that information with internal stakeholders, there are a few important things to keep in mind:
- It is essential to report information on key operating metrics and not only report on items that can be interpreted from the income statement. For example, the balance sheet and statement of cash flows can also provide important information to internal stakeholders, such as: How much cash is tied up in receivables? Have you taken on new debt? What about inventory?
- Ideally, your business should have some sort of management dashboard that summarizes all these key metrics in one place. It should also include metrics and key performance indicators (KPIs) that are unique to your business.
- Financial information and reports should not be viewed in isolation. Rather, the information should be compared to prior periods to understand trends.
- The owners of each metric should be able to explain the results that have occurred so internal stakeholders can understand what the results actually mean. Has inventory grown because of a new product line? Has cash increased because the company is now using a line of credit? Is staff utilization lower because the company is hiring in advance of customer growth?
- Communicating financial information in an organized and easy to understand method—such as using pictures and graphs instead of a list of numbers, and showing trends to help managers visualize projections—can help increase credibility with board members (internally or externally) and improve meeting productivity. Take a look at a recent case study.
The combination of all these will allow the CEO and other internal stakeholders to have greater confidence in their decisions and enable them to make those decisions based on dispassionate financial analysis rather than a “gut feeling”.
We Can Help
Presenting timely financial information in an easily digestible format is essential in communicating with internal stakeholders. If you need professional looking reports prepared to increase your credibility and improve meeting productivity with internal stakeholders, we can help. Contact us today for a free consultation with one of our CFOs.
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