Without consistent performance reporting, strategic decision-making is like taking a shot in the dark.
Strategic planning and decision-making need real-time data and accurate financial forecasting and modeling.
Without accurate data, strategic planning, and even decision-making, is just guessing.
In all, there are four types of performance reporting every FP&A professional should know. When FP&A teams consistently and accurately report on finances, operations, forecast, and model, leadership teams make better-informed decisions.
And, suddenly, strategic decision-making is a slam dunk.
Why Is Performance Reporting Important?
While accountants are closing books and looking backward, FP&A professionals are forecasting and looking to the future.
Consistent performance reporting helps FP&A teams communicate specific financials across an organization to the busy executives, board members, stakeholders, and “non-numbers” people.
FP&A teams work with all departments in an enterprise and guide each department in keeping track of their revenue and expense targets. At the same time, the FP&A team is unsiloing this data and using it to provide insight on how the entire enterprise can stay on track.
Successful FP&A teams and managers work with each department and the business leaders to manage company performance. And they do so by leveraging four types of performance reports.
1. Departmental Budget vs. Actual Reporting (BvA)
FP&A teams are responsible for comparing actuals to budget targets. No matter the size of the enterprise, the FP&A team must track each department’s budget.
Basically, each departmental budget represents the number they are expected to hit, while the actuals are what has been achieved in reality.
When your budgetary process compares actual numbers from a specific period (monthly, quarterly, or the fiscal year) to the numbers you forecasted, keeping track of real-time data is essential. This is especially true if an enterprise spans different locations and currencies.
It’s no secret that FP&A teams face challenges when preparing budget reports, including challenges with real-time information, template versions, fragmented workbooks, and other collaborative roadblocks.
An enhanced data management tool for FP&A is a great solution. It can create and monitor budgets, replace spreadsheets with real-time data, and integrate fragmented data sources and workbooks into an optimal centralized location.
Euclid Systems Corporation (providers of Orthokeratology contact lenses) struggled with consolidating its budgets and the challenges of multicurrency consolidations when reporting and forecasting. Its former CFO, Allan Kaplan, implemented an FP&A tool and boasted that budgeting across the enterprise now happens “without all the lookups, the pivots, maintenance and the chances for errors.”
An enterprise’s future performance should never be a best guess because, with the right budgeting tools, it should always be a slam dunk.
2. Operational Performance Reporting
A strategic plan outlines a company’s direction; operational planning is the actual road map to getting there.
FP&A teams often get stuck in the reporting and data trap, which is why operational performance reporting is essential to any FP&A strategy. In simple terms, knowing where you are going doesn’t matter if you have no idea how to get there.
Setting KPIs (key performance indicators) is one-way FP&A teams can “monitor operational performance and processes” to ensure that the company remains on the right path and moving in the right direction.
Operational performance reporting can potentially save companies a significant amount of money. Montreal Mini-Storage, a Canadian-based storage company, saved $500,000 (CAD) just by upping its operational reporting game.
Igor Bernadski, the CFO, found an FP&A solution that covered operations as well. “The big win for us, I would say, beyond the finance is the operations,” he said. “My sales team, my customer service, my storage operations is using it.”
3. Consolidated Financial Reporting
Consolidated financial reporting gives a complete view of the health of a parent organization and its subsidiaries. Consolidated financial statements streamline the operations from multiple entities, helping the organization become more efficient without having to allocate additional resources.
Consolidated financial statements are the best way FP&A teams can update “board members, stakeholders, and investors of the company’s financial position in its entirety without needing to look into each entity individually.” Consolidated financial statements include all of the information from the parent company and its subsidiaries, including income statements, balance sheets, and cash flow reports.
When a company has one or more subsidiaries, consolidated reporting is the most important of all financial reporting an FP&A team does.
4. Forecasting
Forecasting and modeling aim to predict future liquidity and revenue over specific periods. Forecasting reports are progress reports and what the decision-makers use to make critical decisions.
For example, weekly or short-term cash flow analysis reports done for every function and department of a business drive cash collection across those departments. At the same time, these reports provide the visibility decision-makers need to make the enterprise’s long- and short-term decisions.
The FP&A team from J.L. Clark found a solution to make forecasting work for them, and they do it in under two hours instead of two days. When the finance team of J.L. Clark does “a month-end analysis with department managers, we’d go through them line by line at the end of every month, forecasting out future months. We’d say to supplies or maintenance: ‘You’re $40,000 over for the month. Why?’”
Forecasting keeps all of J.L. Clark’s operations on budget and provides the FP&A team with the real-time information they need to measure business performance both now and for the future.
Datarails Levels-up Performance Reporting for FP&A Teams
Slam dunking your business’s strategic strategy is even easier with a cloud-based FP&A solution like Datarails.
Datarails works on top of Excel to:
- Automate and consolidate reporting — saving you time and allowing you to focus on project management and the strategic insights that drive business growth.
- Provide intuitive workflows, version control, and collaboration across the company, including real-time status reports, trend reports, and baselines.
- Improve data integrity and visibility with comprehensive records like annual reports and audit trails.
- House the latest version of your data in one place — with complete control over how it’s structured.
Best of all, an FP&A solution like Datarails helps you drill down into your data in real time and answer questions on the spot about business processes, cost performance, and so much more.
Ready to learn more? Check out more of Datarails’ success stories, learn about pricing, graduate from the Datarails Academy, or request a free demo!