Reports Presented to the Board: How CFO Services Bring Order to Financial Information

Reports Presented to the Board

Boards of directors usually take the decisions that shape a company's direction on the basis of the information presented to them. The quality of decisions on investment, financing, pricing, hiring and growth is closely linked to the content of the reports that reach the board meeting. Preparing these reports on a regular schedule, in a consistent format and with verified data allows board members to focus on the agenda.

In many companies, financial information is produced in different departments, in different systems and at different times. Accounting records may be kept in one software package, sales data in a separate spreadsheet and bank positions in another file. Bringing this information together in a single structure for the board is work that calls for experience and discipline. CFO Services refer to an experienced finance executive taking on this work and rebuilding the reporting process around the needs of the company.

This article looks at the information that board reports contain, the stages through which these reports are prepared under CFO Services, and the contribution that regular reporting makes to the board agenda. Readers interested in the overall scope of CFO Services may also wish to read our article on the scope of CFO Services.

Content of Board Reports: Which Information CFO Services Bring Together

The purpose of the reports presented to the board is to help members understand the company's financial position quickly and to arrive prepared for the decisions on the agenda. A board report prepared under CFO Services usually presents the company's past performance, its current financial position and the expectations for the coming period together. Having these three time horizons in the same report allows the board to assess both results and trends within a single framework.

The first section of a board report is generally the executive summary. This summary gathers the period's key financial results, deviations from budget targets and the matters to be put before the board into a few pages. Writing the executive summary in clear and plain language helps board members from non-financial backgrounds access the information easily. The list of items requiring a decision at the end of the summary contributes to shaping the meeting agenda.

The second section of the report contains the income statement, the balance sheet and the cash flow statement. Under CFO Services, these statements are prepared by converting accounting records into a structure the board can read. Sales revenue, for example, may be presented by product group, region or customer segment. Operating expenses may be grouped into main categories and shown together with their development over the period. These breakdowns help board members see where profitability comes from.

The cash and liquidity section can be one of the key parts of the board report. This section sets out the company's period-end cash position, available credit lines and the collection and payment projections for the coming months. Working capital indicators are also tracked here. Reporting indicators such as days sales outstanding, inventory turnover and days payable outstanding on a regular basis allows the board to see developments in the cash cycle in good time. We discussed how these indicators are set at the outset in our article on the first 90 days of CFO Services.

Financing and debt structure is also an important part of the board report. The maturity profile of bank loans, the interest structure, the collateral position and the financial covenants in loan agreements are summarised in this section. Monitoring financial covenants periodically helps the board plan financing decisions ahead of time. For companies with foreign currency debt, reporting the currency position separately gives board members a clear view of how risk is distributed.

The budget and forecast section forms the forward-looking part of the report. Here the budget approved at the start of the year is presented alongside actual results, and the reasons for the differences are explained. Under CFO Services, the budget is often supported by a year-end forecast updated during the year. The year-end forecast allows the board to assess the likelihood of reaching its targets and to take early action where it sees fit.

The final section of the board report may cover risk items and investment projects. This section summarises the level of risks such as currency, interest rate, liquidity, customer concentration and supply chain, along with the measures used to manage them. The status of ongoing investment projects in terms of budget, timeline and expected return is also tracked here. In this way, the board has the opportunity to review the company's strategic agenda together with the financial data.

Reporting Calendar and Format: How Order Is Established with CFO Services

The way board reports are prepared shapes the quality of the information as much as their content does. When a reporting structure is set up under CFO Services, the first step is to assess the current situation. At this stage, the team reviews which reports are prepared in the company, who compiles them and from which sources, and to what extent board members use the existing reports. Short interviews with board members help clarify expectations.

Once the current situation has been assessed, the reporting calendar is set. The calendar specifies the working day on which the month-end close will be completed, the date on which management reports will be ready and how many days before the meeting the board pack will reach members. Sharing the board pack with sufficient time before the meeting allows members to review the reports and prepare their questions in advance. Putting the calendar in writing allows the finance team and other departments to see their own responsibilities clearly.

The following steps are often used as the basis for building a reporting calendar:

→  Month-end close: Accounting entries, bank reconciliations and accruals are planned to be completed by a set working day.

→  Data validation: Sales, inventory and customer account data are checked against the accounting records for consistency.

→  Preparation of management reports: The income statement, balance sheet, cash flow and key indicators are compiled in a standard format.

→  Variance analysis: The reasons for differences between budget and actual results are explained together with the relevant departments.

→  Writing the executive summary: The period's key topics and the matters requiring a decision are summarised in plain language.

→  Distribution of the board pack: The completed pack is sent to board members on the date set ahead of the meeting.

Format is the second core element of the reporting structure. Creating a fixed template for the board report under CFO Services ensures that the same headings are presented in the same order every period. A fixed template helps board members read the report quickly and follow developments from one period to the next with ease. Keeping the tables and charts in the template simple supports clarity. Adding a short note beneath each chart also helps readers interpret the data correctly.

Key performance indicators are also selected at this stage. The indicators to be tracked may vary according to each company's field of activity and strategic priorities. In manufacturing companies, gross margin and capacity utilisation may come to the fore. In service companies, revenue per employee and customer collection periods may be among the priority indicators. Under CFO Services, indicators are agreed with the board and senior management, and the definition of each indicator is put in writing. Written definitions ensure that indicators are calculated in the same way every period.

The third element of the reporting structure is the source of the data. The figures in board reports need to be drawn consistently from the accounting system, the sales and inventory modules and bank records. In this process, the structure of the accounting system, the layout of the chart of accounts and the definition of cost centres become important. Adapting the accounting infrastructure to management reporting allows reports to be prepared largely through the system each period. We support this transformation through our accounting systems restructuring service.

Once the reporting structure is in place, the first few periods can be treated as a settling-in phase. During this phase, feedback from board members is collected, headings in the template are updated where needed and the calendar is tested in practice. The finance executive working under CFO Services reviews this feedback and refines the reporting to match the company's needs. After a few periods, the reporting process can become part of the finance team's routine operations.

Contribution to the Board Agenda: How CFO Services Support the Decision Process

A regular and reliable reporting structure moves the focus of board meetings from verifying information to evaluating decisions. Instead of questioning the accuracy of the figures, board members can spend their time discussing what those figures mean and which decisions they call for. CFO Services play a role in bringing about this shift by preparing financial information in a form suited to the board agenda.

The finance executive working under CFO Services is often the person who presents the financial results at board meetings and answers questions. This presentation explains the developments behind the figures in the reports and what those developments mean for the company's objectives. A well-prepared finance executive allows board members' questions to be answered in the same meeting. Questions that cannot be answered are added to a follow-up list and shared with board members before the next meeting.

Tracking board decisions is a complementary part of this process. Decisions taken at the meeting are entered into a decision tracking table together with the responsible persons and target dates. This table is included in the next board pack, and the implementation status of each decision is updated with a short note. Running decision tracking alongside financial reporting under CFO Services makes it possible to monitor, period by period, how decisions are reflected in financial results. The board can then assess the effect of its past decisions and shape new decisions with this information.

Decision support analyses are another area in which CFO Services contribute to the board agenda. When matters such as a new investment, a financing offer, a price update or entry into a new market come before the board, analyses showing their financial impact are prepared. These analyses often include the effects on cash flow, profitability and financing needs under different scenarios. Presenting scenarios with clear assumptions allows the board to evaluate its decision together with the reasoning behind it.

Regular reporting can also support the contribution of independent board members. Independent members, who are not involved in the company's day-to-day operations, access information about the company largely through board reports. Sharing reports that are comprehensive, consistent and timely helps independent members base their assessments on solid information. In companies with audit and risk committees, the reports presented to these committees can be prepared within the same structure.

From a corporate governance perspective, regular reporting helps put the principles of transparency and accountability into practice. Shareholders, investors and financing institutions often regard the information a company presents to its board, and the discipline with which it does so, as an indicator of management quality. Tying board reports to a written calendar and template shows that the company manages financial information systematically. This structure can give the company a head start in preparation when investor meetings, loan applications or partnership processes come onto the agenda.

CFO Services can be arranged on a part-time basis, on a project basis or full-time for a defined period, depending on the company's needs. Setting up and embedding board reporting is often approached with a work plan of a few months. At the end of this period, the reporting process can be handed over to the company's own finance team, or the finance executive's support can continue periodically. The model is agreed jointly according to the company's size, the structure of its finance team and the board's expectations.

In conclusion, the reports presented to the board are among the core inputs of a company's decision-making process. CFO Services bring order to financial information by building the content, calendar and format of these reports around the company's needs. Regular reporting allows the board to focus on strategic decisions, strengthens the contribution of independent members and supports the maturing of the company's corporate governance structure.

At NT Finans Partners, we build your board reporting under CFO Services around your company's structure and your board's priorities, and we stand by you at every stage, from the reporting calendar to the set of indicators. To give your board reports a regular, decision-focused structure, you can get in touch with us.