There can be a lot of operational pressure to keep up with the financial performance of your business. It’s easy to miss an important financial event when you are looking at reports on a monthly, quarterly, or even annual basis.
Creating flash reports makes it easy to spot an important event right when it happens.
Things can be coasting smoothly so you only check in on the reports from time to time. Then the next time you check, things have taken a turn, and you must do a deep dive to figure out what happened.
Take a snapshot
A flash report is a brief summary of a business’s current financial performance based on a few carefully selected metrics. The word “flash” is meant to evoke a camera taking a snapshot of key figures, such as cash balances, receivables aging, collections and payroll.
During seasonal peaks or when undertaking a turnaround, some companies create daily flash reports to track key activities such as sales, shipments and deposits. Otherwise, businesses generally create weekly or monthly reports, depending on their needs.
Flash reports should be as simple as possible. Those that take longer than an hour to prepare or take up more than one page are likely too complex. Flash reports should also be comparative — that is, they need to note significant trends or budgetary deviations that may call for corrective action.
Including graphs or tables can help nonfinancial staff who receive the reports, such as marketing and operations managers, read them more easily.
Use as directed
Flash reports can help you and your leadership team better catch and respond to financial performance developments that demand your attention. However, they have limitations.
First and foremost, flash reports provide a rough measure of financial performance within a short period. Therefore, they may not give a completely accurate picture of where your business stands. It’s common for items such as cash balances and collections to ebb and flow throughout the month, depending on billing cycles. So, you and your fellow report users must guard against overreaction.
Because of their “quick and dirty” nature, flash reports are best used for internal purposes only. Most companies don’t share them with investors, creditors or franchisors unless required under a bankruptcy or franchise agreement.
The risk is real: If shared flash reports deviate from what’s subsequently reported on your financial statements, stakeholders may wonder whether you’re:
- Exaggerating financial performance,
- Running into serious problems, or
- Mismanaging your financial reporting.
That said, some lenders may ask for flash reports if a borrower fails to meet liquidity, profitability or leverage covenants. Should you decide to share reports for any reason, consider adding a disclaimer that the results are preliminary, may contain errors or omissions, and haven’t been prepared in accordance with U.S. Generally Accepted Accounting Principles (if you normally do so).
Get the info you need
Although you can probably find some flash report templates online, proceed cautiously. It’s important to design yours to provide the most relevant data for your company in the most readable format for your users. You may also need to occasionally revise the content and look of reports to keep up with changes to your business. Contact your Rudler, PSC advisor for help developing flash reports, evaluating your current ones or improving any aspect of your financial reporting. Contact us at 859-331-1717.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Heather Pillard, Senior Client Accounting Specialist and Karen Daugherty, CPA.
If you would like to discuss your particular situation, contact Heather or Karen at 859-331-1717.
As part of Rudler, PSC's commitment to true proactive client partnerships, we have encouraged our professionals to specialize in their areas of interest, providing clients with specialized knowledge and strategic relationships. Be sure to receive future Rudler Reviews for advice from our experts, sign up today !