How To Make A Simple Financial Report

Table of Contents

    Financial reporting does not have to be a painful process! In most companies, even the most basic financial KPIs can be quite difficult not only to create but also to maintain in order to ensure that everyone is working with the most updated numbers.

    In other cases, these 2 steps actually work well and it’s the delivery and sharing which are not as smooth as one could hope when it comes to such a collaborative matter. In this article, we will examine different financial reporting scenarios and related key success factors to make your financial reporting practical and successful.

    Financial reporting produced by financial controllers

    Monitoring and reporting the company’s performance is an integral part of their missions and is essential to the sustainable growth of the company. This is why it is necessary to have global visibility and in real-time key performance indicators to understand what’s going on and adjust the strategies at all times. Of all the data financial controllers have access to on a daily basis and could be analyzed, which ones are really relevant for each stakeholder?

    The financial reporting produced by financial controllers usually supports CEOs in managing their business. It involves calculating, monitoring and improving certain financial indicators. But which ones? How often? Financial controlling indicators can be presented in the below 3 categories, equally difficult to produce as the necessary data sit in various applications.

    key financial controlling dashboard to assess actual against budget, profitability
    Click on the dashboard to see it live

    Cash indicators

    DSO (Days Sales Outstanding): this is the average time to recover receivables, it can identify customers in difficulty or highlight the existence of disputes,

    Payment blocking rate: It measures the rate of bank payments rejected, and thus allows to adjust the commercial target or to stop commercial relations with a defaulting customer.

    Commercial indicators

    The number of new customers: this indicator makes it possible to judge the adequacy of supply and market penetration. This is especially relevant for newly created companies.

    Transformation rate: it measures the number of prospects becoming customers and validates the commercial strategy (customer targeting, pricing policy …).

    Average basket: This is the average amount spent by each customer. It can vary according to the seasonality of the activity.

    sales summary dashboard to track your orders, revenue, net profit, shipping costs, average order size
    Click on the dashboard to see it live

    Customer satisfaction rate: this indicator measures the adequacy between the product or service provided and the customer’s needs, as well as highlighting delivery, quality, or price issues.

    Operating indicators

    The effective utilization rate of a production tool (machine, commercial vehicles, etc.): this indicator makes it possible, for example, to detect underutilization of the equipment and to adjust as needed.

    Unavailability rate (of a machine, of a tool …): this indicator makes it possible to notice the existence of flaws in the maintenance or the supply, it is frequently used in the sector of web hosting for computer servers.

    Non-quality rate: this indicator makes it possible to analyze the causes of non-quality (defective raw materials, poor understanding of the customer’s need, logistic error …).

    Inventory turnover indicator: this is the inventory renewal frequency, which makes it possible to judge the efficiency of the supply, but also the volume of sales.

    pricing and supply dashboard
    Click on the dashboard to see it live

    Upon the above definition, you can easily notice the variety of information necessary to build each type of report destined to be shared with the given teams. To ease that process, centralizing data into one single database dedicated to the reporting can help financial controllers automate a number of steps and therefore improve their efficiency. An all-in-one reporting solution can certainly support that and improve the quality of reporting services to their own internal customers.

    Financial reporting produced by accountants

    Accountants are also big fans of financial reporting. It’s almost become a way to survive in a busy market as it allows them to extend their standard offering with some additional services. Before discussing how making reports sexier is critical to increasing user adoption and truly impressing new customers, let’s take a look at which indicators are most often proposed in a financial report provided by an accountant.

    Working capital requirement: it represents the resources needed to finance the operating cycle of the company. Concretely, the higher the WCR, the less there is cash available.

    WCR = current assets (inventories + trade receivables) – current liabilities (trade payables + tax debts + social debts).

    To improve this indicator, you can operate three strategies: the turnaround time of stocks, customers, and suppliers. Finally, you must follow the evolution of your WCR month after month to act upstream by implementing corrective actions.

    Working capital determines whether the balance sheet structure (the financial basis of the company) is balanced, ie if the fixed assets are financed by stable resources (equity and loans). This is the financial reserve that will allow the company to finance its current operations.

    WC = permanent capital (equity + loans) – fixed assets (real estate, equipment, etc.)

    A negative WC means that the financial reserves are insufficient, it is said that the company is undercapitalized. To generate a positive FR, you can, for example, increase equity or buy a loan.

    This indicator must be monitored annually or recalculated during the course of the year if one of the components of the calculation evolves following an investment or a capital increase, for example.

    Breakeven: the breakeven point is the threshold of revenue from which you will generate profits which means the revenue that will cover your fixed costs. 

    Break-even point = fixed costs / [((turnover excluding tax – variable expenses) / turnover excluding tax) x 100]

    The break-even point can be monthly, or even estimated daily, to know if we are in the nails and take corrective action where appropriate.

    The gross margin is intended to cover your fixed costs and operating costs. The level of margin depends on the activity and positioning of the company.

    Gross margin = selling price excluding taxes – cost price* (purchase price excluding taxes in the case of the trade)

    The gross margin rate must be set annually and it is important to monitor its level regularly to ensure that there is no drift and that commercial does not grant too many rebates, for example.

    These 4 key indicators are not the only ones that are useful for entrepreneurs. Needless to say, turnover (all sales or benefits) is crucial and must be communicated to the managers on a daily, weekly, or monthly basis depending on the industry.

    Accountants have all the data to produce these indicators as they need this information to compile the end of the year balance and P&L, it is a great addition to their offering to include more frequent financial reporting. The key is to make these reports accessible and classic accounting software does not usually have a reporting module and when they do it’s for the tax declaration purposes.

    Reporting financial can become a key asset of the accountant services if a data visualizing tool is plugged in to help them turn their usual reports into a sexy dashboard full of interactive indicators. It will not only increase customer satisfaction but also help them in the pre-sales process by showing something more.

    Financial reporting produced for your investors

    This type of reporting is specific to each company. It will not be the same for a bakery for example, who will need to know how many baguettes can be made with a sack of flour that for a start-up selling a SaaS solution, which will need for example to establish its CAC (Cost Acquisition by Customer). It is therefore imperative to start by setting specific goals to achieve in a given time. The number of customers, turnover, profit, market share…

    A start-up that sells a Software as a Service (SaaS) solution will need to know the number of visitors to its site, who are potential prospects. She should also know the part of these visitors who “sign-up”, that is to say, who agree to try a free version, limited in time and/or features, and establish the percentage of leads inbound in relation to the number of visitors. It will obviously be interesting for her to know the conversion rate of customers agreeing to switch to the paid version, to establish its “churn rate” (churn rate), and its ACC, which must take into account all marketing and sales expenses (including the salaries of the sales force), its MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue), which aggregates monthly and annual sales based on subscriptions. This helps in understanding the company’s revenue recovery strategies and financial health.

    Marketplaces will focus on evaluating the overall business volume, as well as the number of transactions over a given period (day, week, month). Indicators such as the average basket per transaction, the average number of purchases per buyer or the percentage of turnover in relation to the overall business volume will be vital to the smooth running of the business, as will the evolution of the business. number of buyers, the number of sellers or the number of listings.

    The e-commerce platforms will first seek to establish the product turnover as well as the turnover of the delivery costs. Of course, the number of visitors, the percentage added to the basket and the dropout basket will be priority indicators. The number of listing, as well as the average price per listing, will also be variables to monitor closely. Finally, the number of reviews or even the number of reviews very positive or very negative will also have importance on the way forward.

    To complete all of the above, there is one common indicator that needs to be steadily observed by investors, and even more so for start-ups: the trends in expenses.

    In general, the business plan of innovative companies foresees one or more loss-making years, with significant marketing costs, before generating its first profits. It is therefore essential to establish an expenditure scorecard, with fixed expenses (rent, insurance, loan repayments, etc.), variable expenses (salaries, expenses, commissions, raw materials, taxes, and duties). You will be able to deduce your burn-rate (your cash needs to pay current expenses), your runway (the amount of time, depending on your starting bet, during which your start-up will be able to work before having to find new sources of funding or profits), and your breakeven (break-even point). Essential for those who do not want to be caught off guard when the kiss comes.

    To comply with investors’ reporting it is critical that companies not only automate the data aggregation but also allow for a report delivery that is easy and accessible. On their end, Venture capitalists could think of streamlining the reporting of their various companies and propose templates including the main KPI maybe organized by sector in order to streamline their analysts’ reviews.

    Financial reporting for your boss

    Here are some examples of key information that you may need to report to your manager depending on your job and the team you operate in.

    HR indicators

    Absenteeism rate: a high number of absences can raise a management problem or unsuitable working conditions.

    The number of overtime: if it is too high, this indicator can detect a recurring work overload or a bad organization of work.

    Turnover indicator: This is the ratio of departures of employees and validates the adequacy of positions and their remuneration to the market, but also the mode of organization chosen and the quality of management.

    Specific indicators for e-commerce businesses

    interactive dashboard combining ecommerce, social media, and marketing data
    Click on the dashboard to see it live

    The number of visits: this indicator makes it possible to measure the attractiveness of the website.

    Bounce rate: this is the number of visitors who visit only one page of the site, it allows to measure the satisfaction of the customers,

    Average time of a visit: this indicator completes the bounce rate,

    RPM (Revenue per Thousand impressions): this is the amount spent per thousand pages viewed, it validates the effectiveness of a merchant site.

    Here is a great to promote your reporting and therefore your work: complete your recurring report with some relevant alerts triggering your manager’s attention when something critical is happening.

    A BI tool to automate your reporting

    And make your life easier!

    Now that you have every financial indicator to monitor and rely on to drive your business, you need to tool to make it happen. And you might want to look at the Business Intelligence (BI) solutions.

    ClicData can help you with that. We are easy to start and free to try reporting solution that brings all your business data in a single place. We have connectors to major accounting software such as Xero, QuickBooks, FreshBooks, and of course allow you to upload Excel and CSV files. But we also offer 250+ data connection possibilities (e-commerce, marketing, CRM, database, and other application with a REST or SOAP API via our Web Service connector). With ClicData you can cleanse, merge, combine your data, and create calculated columns to dive deeper into your data.

    But what will truly change your life is the automation part! With ClicData, you can schedule your data refresh to the frequency of your choice. Daily, weekly, monthly, or up to the minute with a simple click of a button. You will never make decisions based on outdated data ever again.

    You can then create interactive and customized financial dashboards with over 70 data visualization options to highlight your indicators and KPIs. Share them with your customers, your boss, or your investors via a simple LiveLink and make your dashboards available on any browser and any device.

    You’ll also like: