How to design an efficient financial reporting?

Dernière mise à jour : 28/10/2021

It is no mystery that reporting first made its appearance in financial services. It is a great tool to quickly understand the health of an organization (geographically, by department, by time of year...).

Financial reporting also meets an objective of transparency. This last point is related to IPOs, fundraising and loans that require transparency on a company's performance. This is why we have decided to tell you everything about this great tool, that is strongly linked to data !

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In order to illustrate this article you will find a concrete example of financial reporting designed with Powerslide at the bottom of this page!


The reporting rules


To think your reporting

Financial reporting is one of the main tools for decision making. Thanks to it, it is possible to: set budgets, design consolidated reports, promote some financial efforts, etc. The challenges of financial reporting are therefore numerous!

A financial reporting is mainly based on financial and accounting data, but also on data from various departments. To ensure better coordination of these different players, it is recommended to promote the automation of data intelligence. According to a study conducted by the consulting firm Ernst & Young in 2017, 87% of finance departments plan to allocate a larger budget to innovative technology implementation in order to improve financial reporting!

Some external data may also be relevant. It is the case for weather data used by retail companies. Marketing data such as customer satisfaction or periods of strong promotions are correlated with revenue. By not considering these evolutions, you risk excluding information that are crucial to the understanding of your company and its market. A company may expand internationally, diversify its activities, undergo a merger or acquisition...you need to include these parameters when you design your reports.

Furthermore, the data used in the construction of a good reporting must be as accurate and recent as possible. The role of a Chief Financial Officer (CFO) is still to provide reliable information! For example if your company operates with raw materials, why not include the price of the raw material directly in one or more of your indicators?

This use of data is accompanied by a legislative framework. In Europe, the General Data Protection Regulation (GDPR) has a direct impact on data acquisition and processing. Dealing with the topic of the GDPR would be particularly long and beyond the scope of this article. If you would like to know more about it, you can go to its dedicated website.


Speakers and audience

Financial reporting is an interdisciplinary tool. It includes data from various departments. Data from Human Resources (HR), accounting, IT, marketing or sales departments can be found in it. And all these departments brought together have to produce data in an organized way. In addition, calculation methods must be standardized. Data structuring must also be standardized, in order to save a considerable amount of time! To guarantee perfect financial reporting, the automation of some tasks such as adding data to your base is highly recommended; the less human intervention there is, the fewer errors there will be.
In addition, the deadlines for closing the data import must be respected by the various parties involved. Your reporting will then be produced as quickly as possible; in finance things move fast!

Besides the people involved in providing data, you need to think about the recipients of your reporting! A CFO presents his reports to the executive committee members. The conveyed information must be relevant and understandable at a glance, the data visualization work is crucial! Additionally, dozens of pages long reports will never be read in their entirety. Make an interactive reporting of 3 or 4 pages maximum!

The CFO occupation often has an international aspect. Data must be standardized on the headquarters' expectations. Moreover, the preferences regarding data vary depending on the country. For example, in China there's a preference for dealing with real costs over using standard costs.


Structure the reporting

Reporting and related administrative activities represent 40% of managers' activity in France! An interactive data presentation solution such as Powerslide will significantly save you time and effort! This time saving is due to the automatic update of your dashboards and the simplified interactive charts creation process! In addition, periodicity (yearly, monthly...) influences your dashboards' structure. It is also necessary to consider your reportings' distribution. What channel will you use to share your data? During a presentation? By e-mail? Via a simple URL? From this point forward, the tool that performs the data visualization is also the one that shares your reports.


Which KPIs for financial reporting?

Every company has its own financial reporting! All companies evolve differently and do not offer the same services or products. The more a financial reporting will be adapted to the company, the more accurate it will be about the company's situation. Depending on the business, some indicators will be more meaningful about the company's performance. This is why in some organizations, gross margin will provide more information than turnover. This is the case in trading, where the sales figures can be significant while the margin obtained on the products' resale represents only a few cents.

Here are some examples of commonly used indicators:

  • The turnover over a chosen period reveals a company's health. It is also important to be able to compare it to the previous period one.
  • The gross margin usually represents the difference between sales prices and goods or services production costs, excluding taxes. It is used to highlight an approximation of a sales activity's profitability.
  • The top 5 (or 10) of your biggest customers, products, suppliers, loads or regions in relation to your turnover.
  • Debit balance and credit balance. These indicators enable to understand the evolution of a company's receivables. In a way, they are solvency indicators.
  • The percentage of achievement of the revenue target gives you a view on performance and also on needs; and makes it easier to set up future objectives.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA). EBITDA shows what is left from the turnover after retrieving wage costs and taxes from it. This KPI indicates a company's profitability.
  • The turnover or gross margin trends. Presented as a curve, this indicator brings profitability on a periodic basis up at a glance.
  • The break-even point is an indicator that shows the revenue level you must avoid going below. Thanks to this KPI it is possible to accurately assess the financing required to reach operational autonomy.
  • The working capital requirement is the amount of money the company must have to cover its current expenses without having to collect from its customers.
  • The average deadline for collection (or turnover rate of accounts receivable). This is the average number of days it takes a business to collect its receivables and turn them into cash.

These indicators are true indicators of your business' health. However, it is not necessary to display them all on your reporting! You would lose your audience in all these figures. Choose the most suitable ones.

Some external data may be relevant for your company. It is the case for weather data used by the retail industry. Marketing data such as customer satisfaction or periods of special offers are in correlation with turnover.


Example of financial report

Example of financial report (please click on the graphs, it's a Powerslide!)

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