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The SEC imposes strict laws mandating corporate financial reporting, including the information the CFO reports to the Board of Directors. Financial statements demonstrate to the board that the company complies with federal and state laws, including Generally Accepted Accounting Principles (GAAP). CFOs also compare actual figures with their budget regularly to identify potential cash flow problems and ensure the figures add up when presenting them to the Board.
Monthly financial reports serve as a valuable tool for the Board to assess a company's financial condition at a given point in time. They also provide an overall view of how the organization is performing over time.
The format of monthly financial reports depends on the specific information the Board seeks. CFOs may submit monthly reports with detailed information on multiple pages or summarize the most business-critical data on a single page.
Some organizations believe that visual aids, such as graphs and charts, can help board members more easily understand financial data.
The following template shows the standard components of a simple monthly financial report CFOs typically use to present information to the Board (graphs and charts not included):
Source: Earlystagetechboards.com
Companies need to make sure their business leaders have the information they need to make effective business decisions. So it's important to deliver this data to the Board as straightforwardly as possible.
Here are some tips for designing a CFO report template for the Board of Directors:
Not all board members wear suits, and they don't sit in conference rooms all day waiting for business reports. Many are not knowledgeable about department terminologies.
Consider the demographic of your audience. Best practices encourage the format of financial reports to be simple and easy to comprehend.
Board members will most notably be interested in where the organization's performance changed and why. Histograms, for example, display data in a year-over-year format, giving the Board a clear understanding of long-term trends.
Present data in a clear and visually appealing manner so the eye can easily track, interpret and analyze it. Use various column charts, graphs and other visual aids to display data changes over any period and highlight comparisons. Add summaries or comments to explain outliers or other clarifying information to help the Board understand the significance of the data.
Source: Vena
Also, combine data sets to provide the Board of Directors with a clear perspective. Include cash in both dollar amounts and as percentages of the company's total assets. Highlight any accounts receivable fluctuations and provide information pending collections of any debts. You also want to note any financial events the company may need to write off.
The Board will often specify data they want in the CFO's report. Ensure financial reports reflect only accurate and relevant data to avoid confusing those reviewing the reports.
Many organizations provide the Board with detailed quarterly or annual reports, with a simplified overview of the monthly reports. However, when reporting monthly figures, it's essential to have the data to answer any questions the Board may have.
Monthly reports will not have this data. However, automating your reporting processes will provide easy access to more detailed information with just a few clicks.
Whether the CFO sits on the Board or reports to the CEO, they have the primary responsibility of helping board members understand the organization's financial strategy and provide a comprehensive business forecast.
One of the best practices for a CFO is to develop a strong relationship with members of the Board to create and define value. Savvy CFOs do this by providing the necessary information to help the Board make strategic decisions. This also increases the board members' confidence in the CFOs when they can anticipate and address any questions or concerns the Board may have.
Source: YouTube
The CFO's role should always strive to provide an objective view of the organization's financial performance and compare it to previous quarters and overall market trends. A CFO's objective vision should also explain what the Board can anticipate for the organization's future and allocate resources accordingly.
Through transparent reporting, the CFO can effectively assist the Board in understanding the company's weaknesses or strengths, helping the Board make informed decisions about the future of the company.
Automation simplifies your reporting process, streamlining monthly, quarterly or annual reporting to the Board. At Vena, we developed an FP&A solution that enables you to work closely with the entire C-suite, stakeholders and the Board of Directors. Our platform provides a secure environment for collecting, storing and delivering financial reports that are easy to read and comprehend.
Vena's Executive Dashboard places all the data you need to ensure the Board understands the organization's financial position. Integrate that with our free reporting templates and deliver insights to board members with confidence.
Learn more about how savvy CFOs are mastering their reporting process. Read these helpful articles:
Stop spending time developing and formatting your reporting templates in Excel. Try Vena today by downloading our ready-to-use template and streamline your financial reporting process.
Melissa Howatson, Chief Financial Officer at Vena, has a wealth of experience in financial and consulting roles, ranging from EdTech, automotive and Big Four accounting firms. She was CFO and board member at D2L—a global learning technology company—and led its successful initial public offering in 2021. Prior to that, she held finance leadership positions at Bend All Automotive, Qwalify and Primal. Melissa is a CPA-CA, having obtained her designation while working in KPMG's assurance practice. With her combination of scale-up and start-up experience, Melissa has an impressive track record of building and leading successful finance teams that drive the business forward.
