Analyzing financial results is simple: Get the facts and tell a story.

Here is a familiar scene: It’s year-end and you and your team are scrambling to get the final financials done. Once you are done ticking and tying out all the numbers, your CFO or VP asks you to run a comparison to the annual budget or recent forecast. “Don’t just show me numbers. Tell me what happened,” they say.

How did you do? What does it all mean? How do you tell that story?

Luckily this isn’t a daunting task, so long as you follow some simple steps and focus on your end-goal of telling the executives what happened in plain language.

1. Make sure you are comparing apples to apples.

One principal mistake that can be made is that financials may have been budgeted one way and actuals spent another. The can lead to some odd looking discrepancies. If this happens be sure to know why it changed and depending on how your executive staff wants to see the numbers you may need to make adjusting entries in the reporting. Communication with department heads and/or operations during the year will keep you in the loop if you don’t have direct oversight.

2. Talk to your executives. Find out what they need.

Often you can ask, “What are you looking for?” or “What would you like to see?” The response you get is something like, “All of it,” or “Show me everything.” This is usually not what they actually want. This is where communication both up and down the chain becomes important. Responding with more focused questions will warrant better results from your executives. Try questions like:

  • “What areas are you most concerned about?”
  • “Should I look for any specific variances?”
  • “Are there specific accounts or divisions you would like to see?”

3. Make clean layouts for your reporting.

This may seem like a throw-away bit of advice but good business can be won and lost on the cleanliness of reporting. Keep your reports simple. Clients and executives don’t need to see a great deal of granular detail. In fact, focus on division or market-level reporting. It minimizes the numbers they see and shows the important variances easily.

This also applies to color, highlights, fonts, etc. While it might look pretty to have a color-coded report, often times it clutters the important detail that needs to be shown. Let those key items show easily and help the executives make those winning business decisions.

4. Know your detail and ask questions before the executives do.

While the reports presented should be high-level, you should have access to the deep dive detail, should they ask for it. Beyond that, you should have an idea of the items that might warrant questions before the executives even have a chance to see the reports and data. This facilitates more efficient meetings, improves the executive view of the finance team, and helps you prepare to move up the ladder yourself. Again, working with your executives as well a division managers will help you to understand the business as a whole and know better what areas need to be scrutinized. You won’t always be able to anticipate questions, so always keep the detail ready to dig into if needed.

5. Tell a story. Don’t just show some numbers.

Clean reporting, excellent informational background, and good data are great, but they don’t explain anything. When an executive asks why Days Sales Outstanding (DSO) went up, they don’t want you to to tell them that collections are taking longer. That is just the number. A better answer is, “DSO went up because we have changed our credit terms to 60 days versus 30 to facilitate a better relationship with our larger clients. While this results in a higher DSO, the clients are more amicable to purchase their widgets with us, resulting an increase in revenues.” That is a story. It explains what is happening and why it is happening. This can be done during a meeting, as notes on a report, or in a cover letter or memo outlining the highlights of the report.

Related Article: How to Design a Scalable Chart of Accounts

In the end, the key across all of this is communication. A bit cliché, but no less true.

Key Takeaways

  • Communicate with departments to understand what is happening at the ground level.
  • Communicate with executives to understand needs and company drivers/initiatives.
  • Ask questions to facilitate discussion for better clarity.
  • Even clean reporting is good communication. Simple reports communicate the information quickly and easily.
  • Communicate your answers in plain language. Tell people what happened.

Hopefully at your next forecast revision or budget-to-actuals meeting you can take this advice with you and improve not only your reporting but your communication and create value for your whole organization.

Request info about financial analysis and reporting tools from our finance and business intelligence team.

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