Generally speaking, a good reporting package should consist of the following:

• Balance Sheet and Income Statement
• A Statement of Cash Flows
• Loan agreement term (”Covenant”) test
• Divisional/Line of Business Income Statement
• Key Performance Indicators
• Commentary and analysis

Every business has unique requirements, so you can’t necessarily create a blanket solution for every case. For instance if you don’t have existing loans, you won’t need to test your loan agreement terms. If you operate a single division there is obviously no need for multi-divisional reporting. 

Personally, I recommend preparing your monthly reporting package in Excel with two versions: One for the internal audience (management) and another for the external audience (usually a bank). Management requires more information than a bank would, so I typically limit the external version to include a Balance Sheet and Income Statement only. 

Using Excel for both the internal and external reporting package forces a ‘lock down’ on your numbers for the month, and provides your accounting personnel with a finishing point to the period.  I typically encourage accounting staff to email me the final Excel reporting package when it has been reviewed and completed.  Preparing this package in Excel also allows for further analysis and commentary (such as a report of your Key Performance Indicators) within one document which can be saved for future reference. 

To effectively operate a business with revenues exceeding $7-$10 million it becomes a requirement to go beyond your basic financial reporting- and it should be prepared for you within a reasonable time period (no more than 15 days after month end).

If you have a need for higher quality information, and are not getting it, don’t settle for less. Ask your accounting staff if they can prepare something like the reporting package suggested above. Your path to better business performance depends on it.

If you’re the type of entrepreneur who’s used to doing everything, running the business by intuition instead of facts, you could find yourself in a serious financial setback that could otherwise be avoided.

For example, if you are used to looking at your Income Statement only, you won’t necessarily be able to see a down trend in sales, and the resulting build up of inventory. 

Or maybe certain non-accounting production indicators are heading in the wrong direction but you are currently selling your earliest produced inventory at yesterday’s (lower) cost. By the time the poor results hit your Income Statement, it’s too late.  This is especially important in manufacturing companies with long production lead times. 

I can’t tell you the number of times I’ve watched business owners get caught in this trap. They make a move to grow their business by expanding into a new territory, adding a new product, or buying another company, only to quickly become lost without the critical facts and numbers.

Scenarios like this can be avoided by expanding your financial reporting beyond ‘accounting numbers’ before you make a big business decision.   

Accounting numbers are things like a Balance Sheet and Income Statement. Non-accounting numbers are things like efficiency, production output, labour cost per unit, production costs per unit, sales order book, net sales added, and the like. 

Think about which non-accounting numbers are crucial to your business, and try adding them to your monthly reporting requirements. You’ll quickly find yourself wondering how you got by for so long without them.

The goal of the engagement is to provide senior level financial leadership in support of the company’s growth plans.