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5 BEST PRACTICES OF BOARD REPORTING

Board Reporting
Cloud
Collaboration
Management Reporting
Performance Reporting

8 min read
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AUTHOR:

Dominick Fatibene

Senior Product Marketing Manager
Published: June 10, 2020
Last Updated: October 14, 2021
IN THIS STORY

Board reporting is more important than ever, even though the only thing most
board rooms are gathering is dust right now. Just like closing the books
remotely and holding virtual shareholder meetings, the board has also had to get
creative in how they meet. That means regardless of whether you're working in
the office or from home, the creation of board reports still must go on—making
the manual, time-consuming, and just plain risky process that much more painful.

In fact, I was speaking to some of my colleagues the other day who support the
board of directors. They told me in many cases, their boards are meeting as
frequently as weekly to address damage control, alter business strategy, adjust
forecasts, and assure there is enough cash to protect the business.  

In addition, increasing shareholder activism, high-profile board failures, and
expanding regulatory demands are driving increased expectations of board
performance. As board accountability increases, directors are engaging more
deeply and more often with management and staff to develop and implement
competitive strategy.

Not surprisingly, strategy is the #1 thing discussed in board meetings. Your
board makes extremely strategic decisions that set the entire organization in
motion, from culture to operational strategy. That’s what boards do. 

But, it’s not based on magic or gut instinct. They are looking to the analysts
and accountants—and the reports, books, and decks they create—for support. Are
you clearly delivering the numbers and narrative needed to help inform and shape
that strategy? 


WHAT SHOULD BE IN AN EFFECTIVE BOARD REPORT

Results may vary, but there are some commonalities to board reporting. The
Chartered Institute of Management Accountants (CIMA) recommends a focused
financial report of 3–6 pages summarizing the issues and highlighting the
overall position. Use graphs and charts to replace lengthy tabular information.
Activity data should link to financial performance, and variances should be
calculated and explained. 

The report should also integrate nonfinancial and financial reporting. Also
suggested are an abbreviated P&L account showing period and cumulative positions
with highlighted variances against budget, trend analysis, YoY comparisons,
full-year projections, and performance indicators used to illustrate trends in
liquidity, asset utilization, etc. 

According to one survey, providing this level of decision-making data for more
effective board reports is easier said than done—especially when accounting and
finance teams are already crunched for time with the regular cadence of
financial reporting and ad hoc analysis.

When finance leaders were asked how they would use an additional day per week,
44.5% responded that they would use the extra day to provide insights into the
business. It's obvious that finance leaders recognize the importance of
analysis—they simply do not have the time to devote to it.

To fulfill these expectations, board demands for high-quality financial and
management performance reporting have never been greater—many finance
professionals are struggling to meet the demands of their organizations.
Systems, processes, and culture are challenged by:

 * Time-consuming and inefficient processes
 * Inconsistent and inaccurate data
 * A lack of transparency that undermines data governance

These challenges are just three of many which undermine an organization’s value.
In order to overcome these challenges, consider the following best practices to
ensure your business creates the highest quality board reports.


1. MEASURE ONLY WHAT MATTERS

High-quality financial and management performance reporting should contain all
the information the board of directors needs to make decisions about corporate
governance, to oversee the development and execution of corporate strategy, and
to execute specific duties in audit, risk, and compensation. 

Keep in mind, too, that boards today evaluate corporate performance on a wider
range of issues, including corporate policies, environmental, social and
governance (ESG), and reputation practices.

What is meaningful to measure, monitor, and report to the board are the ongoing
discussions between business units, the C-suite, and directors. CIMA says that
in order to be useful for board reporting, financial information must be
material, relevant, reliable, comparable, and understandable.

In addition, a report by the National Association of Corporate Directors (NACD)
recommends using the following questions as guidance when determining what to
report and how to narrow which nonfinancial metrics to monitor.

 * How does this metric reflect and support our strategy?
 * Does this metric reflect a key performance driver for our company?
 * What aspects of performance does this metric drive?
 * Is this metric used in our executive compensation plans?
 * Do we as a board understand how this metric is calculated and why it is used?
 * Is this metric commonly used in our industry? Do our competitors use this
   metric, and if so, how do we compare with them?
 * What other metrics does our industry use?
 * Do we have information about this metric for past performance periods, and if
   so, what is the pattern?
 * Is the company required to disclose this metric to investors (e.g., under the
   U.S. Securities and Exchange Commission’s Regulation S-K as part of the
   annual 10-K filing). If so, what message does it send?
 * Is this metric required by executive branch agencies such as the U.S.
   Department of Labor or the EPA? If so, is our score above or below what is
   considered desirable?
 * Will a low score on this metric bring us negative media and/or shareholder
   attention?
 * Is there good news that the company should promote through its website and
   media channels?

The most effective boards collaborate with management to create well-defined key
performance indicators (KPI), comparisons, and benchmarks to monitor
performance. As stated in the NACD report, the greatest challenge for directors
will be to select and apply the metrics that are the most relevant to their
organizations. Well-designed board books will provide meaning and insight, and
they will tell a consistent story.


2. AUTOMATE DATA COLLECTION

Cloud systems have streamlined information management, yet they haven’t
dislodged spreadsheets entirely as preferred business tools. Change is hard, but
the consequences of not changing can be greater. Manual processes are
error-prone, time-consuming, inefficient, and lack transparency and
tracking—risks that are no longer acceptable in a contemporary business
environment.

The solution? Standardize the data collection process through automation or
well-defined processes in order to reduce error and the time it takes to create
reports. An end-to-end data management process works through documented
reporting policies and procedures, ongoing communication with the team, training
and cultural change, and the resources needed to meet performance expectations.

At the business unit level, it is important that data is entered once and only
once into a centralized information management system where it can serve as a
single source of truth. Automated data collection solves multiple problems and
allows more time for staff to conduct high-value business analysis, consistent
data across reports, and easily traceable audit history.


3. USE A CENTRALIZED INFORMATION MANAGEMENT SYSTEM

Companies are hampered by outdated processes and information management systems
that can’t keep up with the demands of cross-functional financial and management
performance reporting. Their biggest complaint: the inability of internal
systems to integrate information across business units. All too often, creating
a report involves duplicate efforts between the finance and business units.

A centralized information management system makes it possible to aggregate the
correct information, in the correct format, and can provide detailed analysis of
key information and the raw data. It can be tracked and traced to the source and
accessed by multiple users.

This kind of centralized system fulfills three critical business functions: 

 * First, it integrates information from multiple sources into a consistent body
   of business intelligence. 
 * Second, data governance and user transparency are ensured through the right
   tracking mechanisms. 
 * And third, technology can be the enabler of collaboration between finance and
   the business unit. Liberated from low-value tasks, finance can focus their
   analysis on transforming data into business insights.


4. AUTOMATE YOUR REPORTING

Board books are recurring documents with delivery schedules penned in ink a year
in advance. There are also interim board presentations and reports that are
required on a more frequent basis, especially in times of all-hands-on-deck
leadership like these. 

Automated reporting solutions streamline the process of document consolidation,
production, review, and approval. The less time your finance and business unit
teams spends fighting with software, the more time they have to collaborate on
analysis and insight.

The right automated reporting solution:

 * Streamlines repeatable processes
 * Enables team collaboration by supporting multiple users
 * Consolidates all data in a single, secure cloud platform that is easily
   accessible while working from anywhere
 * Provides extensive permissions during report production
 * Maintains document history through version control and audit trails
 * Ensures data governance from source through report
 * Enables simultaneous changes to linked number, text, and chart data across
   multiple documents
 * Provides opportunity to present narrative around the numbers
 * Is compatible with the leading business software suites
 * Contains a full suite of document production tools to enable team editing
 * Allows the ability to make changes even after board book distribution
 * Delivers a final board book through a secure cloud portal
 * Delivers digital binders on all devices, tablets, and operating systems


5. TRANSITION TO THE CLOUD

Many companies have made the transition to cloud service providers to create,
store, and distribute their board books. Printed board books are burdened with
inefficiency, expense, and weak security. Shipping physical board books to
directors around the country is costly. In addition, most directors want the
flexibility of accessing their board books anytime, anywhere, and from any
device they choose.

If reducing expenses and increasing efficiency isn’t persuasive, consider
corporate security. Printed board books are easily lost or left behind in hotel
rooms and airplanes—and it happens more than you would think (or your legal team
wants to admit). A lost or stolen board book that contains sensitive material
and insider information is a high-risk situation that exposes the company to
threats and legal liability, not to mention a lack of trust going forward.

These five board reporting best practices are designed to give time and accuracy
back to the team. 

By automating processes, reducing manual and duplicative work, and investing in
technology, you can give the board of directors the insights it needs to make
strategic decisions.

To learn how Brown-Forman modernized its board reporting with Workiva, watch
this short video.

Editor's note: This blog post was originally published Aug. 24, 2017, and has
been updated to reflect recent circumstances due to the COVID-19 pandemic.


BOARD REPORTING TRENDS AND BEST PRACTICES IN THE DIGITAL AGE

Don't forget these key items the board and management should keep in mind.

White Paper Wdesk
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About the Author

Dominick Fatibene

Senior Product Marketing Manager



Dominick Fatibene, Senior Product Marketing Manager at Workiva, works
exclusively with controllership and financial planning and analysis (FP&A)
organizations to identify and support simplified internal financial reporting
approaches that reduce risk and drive efficiency. Prior to joining Workiva in
2018, Dominick spent seven years at General Electric, holding various positions
across finance, including operational finance, global and operational
controllership, internal audit, and corporate FP&A. Dominick has been involved
in all aspects of finance, including entity and segment accounting,
consolidation, strategic planning, earnings, investor, and board reporting.
Dominick was a member of GE’s prestigious leadership programs, including the
financial management program and corporate audit staff.




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