TRICKLE DOWN REPORTING
Who should define the reports that should be issued in a business and how often
It’s a common scenario I’ve seen happen over and over again in small businesses. Owners and managers hire an in-house or external accountant and get frustrated when they don’t receive information on time or in an easy to read format. They get even more frustrated when they hire more accountants or finance professionals and still don’t receive what they need to make decisions. The problem is not so much with the professionals they hire. The problem is that without clear objectives, a list of the reports they want to analyze and the frequency with which they want to analyze them, owners and managers will never receive what they want.
The Issue
As explained at the beginning, report formats and frequency should be a “trickle down” policy, in the sense that it is up to small business owners to explain to their accountants which reports they want to analyze, how they want them to be formatted and when they want to see them.
Here’s the thing. Everybody thinks, acts and behaves differently. I’ve worked in several companies as an employee and given financial assessments to several clients as well. Even though most of them want to analyze the same subjects in general (i.e. profitability, liquidity, cash flow, etc.), each owner has a unique point of view and set of requirements of how they want the information to be presented. To go even further, each finance professional has their own way of formatting their reports, their excels and of presenting data.
If every finance professional has their own unique way of registering and issuing reports, then it is up to the business owner and/or manager to determine how these reports should be issued and when.
The How
One thing to keep in mind though is that if you just hired someone, he or she won’t get it right the first time. I’m not talking about having correct or incorrect data (it should always be correct). What I’m saying is that the first time you ask them for a particular report, they will present it to you in their own format. Your job is to review and correct everything on that report with a precise to-do list of what he or she should present the next time.
You need to be very specific on:
- What additional details you want to know (i.e. “what are these expenses composed of”);
- Which information is relevant to you and which isn’t;
- How do you want the items to be classified or reorganized in the report; and
- Last, but not least, how frequently do you want this report to be updated and presented to you (i.e. daily, weekly, bi-weekly, monthly, etc.).
The Most Important Detail
The last point in the previous subsection is of extreme importance. If you don’t review this information on a periodic and consistent way, the message you are sending is that it is not very important to you, motivating the finance professional to slowly leave it aside until you ask for it again. My suggestion would be to set recurring events on your calendar inviting your accountant or finance professional and having these meetings the same day and time of each week or month. If you want updated, accurate information delivered to you on time to be able to make the right decisions, then it all depends on you and what you request of your team.
How about you? What are some reports you are having trouble with receiving to make decisions? Tell me about your experience in the comments below or write me an email at info@thefinancecourse.com.
Giancarlo Jiménez, founder of The Finance Course, is a Finance Professional with more than 11 years of experience in the field of Finance and more than 4 years of experience teaching about Corporate Finance in a Business School. Want to learn how to interpret Financial Statements & Ratios to make decisions at your small business? You can Sign Up To The Free Course by visiting this page.
