October 5, 2022
This is a guest blog post by Paul Barnhurst, the founder of The FP&A Guy and the host of FP&A Today
The flash report is a key strategic reporting that finance provides the business periodically. The report is an estimate of actual performance prior to the closing of the current reporting period. Flash reports typically cover three main areas:
How often and what is included in the flash report will vary by company. The purpose of the flash report, however, is similar across all companies. The goal is to provide periodic insight into financial performance to leadership before closing the books. This report helps the leadership team understand the company’s direction and adjust operations when performance is not as expected.
In this article, we will discuss what is included in the three types of flash reports and a list of best practice tips for implementing flash reporting. Let’s start by discussing the different areas that flash reports generally cover.
A liquidity flash report aims to help leadership understand the company’s overall liquidity and cash position. Many companies will provide weekly reporting of the cash position. This will typically include a review of select balance sheet accounts, cash inflow and outflows, and any key metrics that need to be measured. Key measures could consist of debt coverage ratios, burn rate, etc. The goal of liquidity flash reporting is to:
The goal is to provide enough information in the report to allow the business to manage the company's financial liquidity and cash position as often as necessary to ensure financial health.
Profitability flash reporting helps management see key drivers of the company’s financial health, including revenue, expenses, and profitability measures. This report will be delivered as often as reasonable and practical to the business. Some companies will receive the profitability report daily, while others might only receive it weekly or monthly. The frequency of the reporting will depend on the type of business and the needs of the leaders. If daily profitability allows the company to spot outliers and make corrections, a flash report might be delivered daily. An example could be an e-commerce platform that wants to make near real-time adjustments to pricing and promotions based on current performance trends. On the other hand, a stable subscription business that sells monthly subscriptions might look at the flash report once a month near the end of the month. The primary goal of providing flash reporting around profitability is to allow the business to identify trends and outliers before receiving month-end reporting and take corrective action.
The purpose of providing operational data in a flash report is to capture key leading indicators of the company’s overall health. A few examples of the type of metrics that might be included in operational flash reporting include:
The operational flash report should include the 3-5 key measures that drive the performance of the company or department receiving the report. These should be measures the business can influence when out of line compared to expected outcomes.
Implementing flash reporting can be challenging for many companies as often a tendency exists to make the process complex and comprehensive. However, by following best practice tips and focusing on the key needs of the business, one can implement a flash reporting process that will prove valuable to the different business leaders throughout the organization.
Below is a list of 8 best practice tips for implementing flash reporting
The following sections will briefly discuss them below.
The first tip for ensuring that flash reporting is valuable is to sit down with the business leaders and determine the key metrics that need to be tracked. As a rule of thumb, keep the key metrics tracked for each area of the flash report to no more than 7 items +/- 2, as studies have shown that 7 +/- 2 is what a person can retain in short-term memory.
For example, if a key initiative is to reduce travel expenses, the flash report should include T&E expenses in the profitability section. However, if T&E is a very small part of the overall business expense and immaterial to the company’s overall profitability, it should not be included in the report. Once metrics have been identified, review each to ensure they are actionable and reportable.
When creating and preparing flash reporting, always follow the keep it simple principle. As a general guideline, one should simplify the process if it takes more than
In addition to the above guidelines, review the report with each business leader and ensure they can identify the key takeaways within the first couple of seconds of looking at the report. If it takes more than a few seconds, the report is either poorly structured or overly complex and should be revised and simplified. Reviewing the reports regularly for simplicity will prevent flash reporting from becoming overly complicated. The more involved the process becomes, the less likely it will be followed and provide the desired benefit.
Flash reports should be delivered to all key business leaders, and the report should be tailored to the needs of the business leader. This means some companies will have multiple flash reports, one for the C-Suite and another for key leaders of the different business units. An example of a customized report would be an operational flash report developed for the Head of the Call Center focused on key productivity and efficiency metrics such as Average Handle Time (AHT), case resolution time, # of total calls, etc. The key is ensuring that each report provides the insights the different business leaders need to take action on the information provided within the report.
When developing flash reporting, it is essential to provide comparison periods to put the estimated results in proper context. Generally, when showing monthly flash reporting, one should include the same period last year, the budget, and the latest forecast when available. If presenting a weekly flash, it can be helpful to see a few prior weeks (2-3) and the same period last year for trending and comparison purposes. The historical data and budget information provided will vary by company and report, but the key is to provide data that helps in understanding trends and puts the overall message in proper context.
FP&A departments are looked at as strategic partners for the business. We have a responsibility to help the business achieve a company’s financial objectives. With this in mind, we need to do more than provide business leaders with a flash report. We also need to provide commentary based on the data and insights gathered for the report, along with potential recommendations. An example would be if travel is high in the flash. If it is high, it should be researched; if research revealed that several class tickets were purchased, a recommendation should be made to address the situation. For example, one could recommend changing the review policy or having senior leadership address the issue of 1 class tickets being purchased.
When sharing the financial story with the business, it is easy to get caught up in fancy visuals and dashboards. When I first learned Excel, I thought lots of color and 3-D charts and graphs were excellent and improved my presentation. Today when I think I did that, I cringe as I realize the visuals distracted my reader and me from the core message. Simple charts and graphs can be valuable but remember that the flash report is about providing an estimated performance snapshot that aids decision making and keeping it simple is key. For every piece of information and visual added to the report, ask what purpose it serves and how the information will be used—this aids in deciding if adding a visual benefits the overall report or not.
The idea of the flash report is to allow business leaders to look at a report and quickly make decisions. The report needs to be succinct and to the point for this to happen. The report’s summary is recommended to be no longer than one page. In addition to the summary, one can add additional data on follow-up pages to help the leader analyze a number he wants to understand better. However, this should be support information and not the core of the report. If the report becomes several pages long, many people will stop looking, and it will lose much of its value.
Automation is key to making this process more efficient; without automation, many finance departments will struggle to maintain the process. I can remember when I developed a flash report for one of the businesses I supported, it often took me several hours to put the numbers together when I started because everything was manual, and I had to pull the data from multiple sources. I quickly realized this approach was not sustainable and worked to find ways to automate and streamline the report-gathering process so I could focus on the message behind the numbers.
When building out the process, use systems to automate the pulling and consolidation of data and use templates whenever possible, using templates will prevent one from having to recreate the file each month. A streamlined process allows one to refresh the report, review the data, and focus on providing value-added commentary and recommendations. One software that automates and streamlines the flash reporting process is LiveFlow. LiveFlow automatically links to accounting data and has prebuilt flash templates that have been developed in partnership with GrowthLab Financial. All that needs to be done to use one of these templates is a simple refresh of the data, review of the numbers, and adding of commentary.
The flash report is something that companies should use to understand results throughout the month better. How often, what metrics, and what accounts to include will vary based on the needs of the business. When implementing flash reporting, remember to focus on providing reports that:
Keeping the above in mind and implementing best practice tips will ensure that the flash reporting process adds value to the organization. One tool that can help automate and streamline financial flash reporting is LiveFlow. Check us out LiveFlow by requesting a demo.