Business Core · Finance · Module
Financial reporting
Turning transactions into a statement of what happened, for people who have to decide something on the basis of it.
The idea
How it works
Internal reporting has a different job from statutory reporting. Statutory accounts must be correct; management accounts must be timely, and a report that is accurate to the penny and arrives six weeks late has failed at its actual purpose.
The other failure is presentation without interpretation. A statement handed over without an explanation of what changed and why leaves the interpretation to whoever reads it, and they will each reach a different conclusion.
Working with it
In practice
- 01
Close fast and accept approximation
A five-day close with estimates beats a twenty-day close with certainty, for management purposes.
- 02
Report against something
Budget, forecast or prior period. A number alone carries no information.
- 03
Explain the variances that matter
Three explained lines are worth more than forty unexplained ones.
- 04
Keep statutory and management reporting distinct
They answer different questions for different audiences on different timescales.
One level in
The components of financial reporting
A component is something that exists afterwards which did not exist before — a deliverable or a mechanism, not an intention.
Accurate to the penny and six weeks late has failed at the job. Close fast; explain the three lines that matter.
The other modules in finance
Budgeting
Allocating money to intentions for a period ahead. A budget is a set of decisions expressed in numbers, not an administrative exercise.
LearnForecasting
A current estimate of where the numbers are heading, updated as the world changes. Distinct from the budget, which is a commitment.
LearnCash flow
Money actually moving in and out, by date. Profitable organisations fail here, which is why it is tracked separately from profit.
Learn