4 Tips For Improving Financial Reporting

By Andre Gilmore, Senior Consultant, HTG Peer Groups

Accurate and timely financial reporting can be a valuable tool in managing any size business. A leadership team equipped with accurate financial data is empowered to make quicker, more informed decisions and effectively keep up with changing market conditions. However, many businesses struggle to produce accurate, decision supporting documents in a timely fashion, frequently leaving business leaders feeling as though they are constantly looking in the rear view mirror while trying to drive forward.

Here are a few practical tips to improve your financial reporting and keep your decision making team looking forward.

1. Standardize your book close process. There are a multitude of inputs that go into the book close process. By clearly documenting the process and enforcing deadlines throughout the organization, a clean, repeatable process can be established. Without a clearly defined standardized book close process, the accuracy of your reports will suffer as inconsistencies and excessive adjustments change your financial understanding of the period being reported. It is important that the entire organization gets into the rhythm necessary to support accurate financials.
    
2. Align reporting objectives with business strategy. Ensuring that those responsible for producing financial reports understand your business strategy and have reporting objectives that support that strategy is critical to improving overall financial reporting. For example, if one of your major thrusts for the year is improving gross margin dollars, it is imperative that your management team have accurate and timely data to manage this. Your financial team needs to understand this and have complimentary objectives relative to providing accurate reports. Aligned objectives help to define organizational priorities and improve reporting effectiveness.
    
3. Re-evaluate your chart of accounts. As your business changes over time, your chart of accounts may need to be adjusted to provide better visibility into the current state of your business. For instance, you may have a line of business that did not justify a separate account in the past but has now grown to 10 to 15 percent of company revenue. Another instance that may warrant a chart of account change is hiring a salesperson or team. You may want to add commission or detail to your cost of goods sold accounts to account for this new expense. Whenever your business evolves, it is wise to take a look at your chart of accounts and reflect those changes. Usually this is done at the beginning of the fiscal year in order preserve comparative data as much as possible.
    
4. Compare actuals to budget. In order to execute at a high level with regard to business profitability, it is very helpful to have a plan. A well thought out planning process challenges business leaders to be disciplined in projecting the financial resources needed to support the growth or maintenance of a particular revenue stream. When done properly, predicted revenue (sales plan/forecast) can be aligned with projected expenses (expense budget). We can therefore project profitability for a given time period. When this is in place, we can compare actual financial data to what was predicted. Monthly reporting on the delta between plan and actuals can help leaders rapidly identify changing conditions or incorrect assumptions. The objective is to make the necessary course corrections needed to protect the bottom line.

Effective financial reporting can lead to business leaders asking better questions, which in turn can lead to better decision making. Employing these simple tips can equip your organization with the financial information they need to more effectively manage through dynamic business conditions.  

Andre Gilmore is a Senior Consultant with HTG Peer Groups.  Prior to joining the HTG Peer Groups staff, he spent almost 20 years in various roles in small business ownership, operations management and business process improvement. He is passionate about analyzing company financial data to plan for the future, and helping companies improve their level of execution by implementing sound business processes. You can reach him at agilmore@htgpeergroups.com or find him on LinkedIn.