Don’t Deprive your Company Management of Meaningful Financial Information

Why you must make sure financial information is periodically, timely and properly communicated to those who really need it 

It’s no secret that accurate and complete data is critical to assessing the financial health of any organization, past, present and future. Equally paramount is the use of the right tools in analyzing financial data spanning historical periods, the current fiscal year and all future periods presented through a plan and budget.

All this data, when correctly used, can provide insight into the company’s performance and even project the financial direction it is headed in and influence the decisions that management must make along the way, such as:

• Will the company be able to continue and sustain its growth (given that marketing and sales opportunities are executed according to plan)? Are specific changes needed to achieve that?
• Will it have the cash required for this growth? Will it require additional financing? When? In what amount?
• What additional employees are going to be needed? In what departments? When?

Or conversely:

• Will the company have to restructure its operations anticipating a downturn in the economy? Will the workforce have to be reduced? How? When?
• Will new financing be required in order to be able to weather this economic downturn?
• Will selling of certain assets be required? When?
• Is the company facing new competition? Will it need to change its strategic and operational plans?

There is little doubt that such important decisions must be supported by reliable facts; simply relying on experience, intuition, or speculation usually does not work. As financial professionals we have all seen how even large organizations make poor choices and decisions – often discovered months and sometimes years later. We’ve no doubt witnessed badly executed acquisitions or acquisitions that should not have been made in the first place and expansions into new product lines and new territories without proper research and analysis of existing data and business intelligence. We observe decisions that were not based on facts or reliable data, but due to the inability to properly read and understand data because of lack of a structured analytics process or poorly chosen tools for the job.

Yet, as finance executives and professionals are tasked with providing management with this needed information, delivering presentations that are both complete and accurate and also easy to understand, they are also doing themselves a disservice by sticking with the tools and processes that have always been. The pull of tradition is strong and taking the path of least resistance – doing what has always been done even if it ends up costing the business in the long run – is often the path most taken.

For example, I’ve seen organizations that had both the need and opportunity to set up financial tools that would achieve analysis and reporting excellence, but decided not to; they were simply too wrapped up in their daily work to make the change -- caught up in period end closes and delivery of internal and external reporting.

This is when finance leadership, driven by a progressive CFO, can make a tremendous difference. These leaders can encourage their organizations to break the pattern – which is usually limited to collecting and compiling budget data only pertaining to revenue and expense items, while frequently not even comparing it to actual results and certainly not in a timely manner. A much more progressive approach, which surprisingly does not take more time or resources to complete, yet affords management the right information they need, lies in shaking up the norm and taking the right steps towards forecasting the balance sheet.

Finance professionals must forecast beyond just revenue and expenses in order to deliver better financial insight to their executive teams and line of business managers who depend on accurate data. Developing a forecasted Balance Sheet and Statement of Cash Flows will not only provide a clearer picture of what the organization can realistically achieve in the near term, but provide the direction needed to help the company succeed in the future.

When company CEOs are measured by their organizations’ results and are replaced when expectations are not met, it is vital that those who lead the organization are given the best possible view of their organizations’ performance. Through meaningful reports and presentations obtained from a comprehensive data delivery system that draws from past, present and future (forecasted) data, CFOs and their fellow executive team members are empowered with accurate, reliable data. No longer dependent on information contained in archaic systems and handcuffed by outdated, inefficient processes, financial professionals can deliver the critical financial data their organizations need to grow and thrive.