As both a business owner and as a CFO, I’ve worked with dozens of early-stage startup and growth companies. These business owners and entrepreneurs often ask me what I do for my company’s financial and operational reporting. What do I look at? And why do I look at it?
Companies vary significantly in their reporting needs. That is, their key performance indicators or KPIs vary. How they go to market differs. Their sales organization and the marketing they do also affects the reporting they need.
That said, here is my answer—my financial and operational information cadence for AVL. Here is the architecture of AVL’s reporting that I use as an owner and CFO of my own company, which I share as a guide for other business owners.
At the end, I’ll include a link to an example set of documents.
1. The Weekly Scorecard
The weekly scorecard focuses on bottom-up progress towards our near-term/quarterly objectives. It brings a lot of team accountability, via a very near-term look as to whether my key team members are on track. It’s a very smart metric for goal-tracking in terms of where we’re trying to move for the quarter.
First and foremost, I use the scorecard in our weekly management team meeting. We utilize the Entrepreneurial Operating System (EOS) from the book Traction: Get a Grip on Your Business by Gino Wickman. On Monday mornings, we have a one-hour meeting where we review the scorecard, go over our key quarterly “rocks,” identify/discuss/solve (IDS) key issues, and document key action items for the week.
Here’s what’s on our scorecard:
Pipe. Obviously we focus on our sales pipeline. How many deals or opportunities are we looking at right now? Whether current clients expanding their services with us or new clients, this report shows what stage those projects are in and how they are advancing.
Win Rate. Are we winning more clients or losing more? We are keeping an eye on that macro stuff.
Customer Stats. How many are we serving and what is the makeup of those customers?
Our People. How many billing professionals are on our team? What does that look like geographically?
Accounts Receivable. Then of course we look at our DSO and make sure we’re collecting on A/R. You could look at A/R every day or you can look at it every week, which fits us for how we operate our business.
Other. Many other items could be on your weekly scorecard. We are migrating towards some of the marketing-oriented info like web traffic and marketing engagement. We have seen stats like uptime, client call volumes, product usage/engagement and many more. Whatever the metric, make sure that weekly is the right pace for your company.
2. The AVL FlashPakTM (Monthly)
The second component is something I am really excited about. I love how we use this report. We call it the AVL FlashPak. It’s produced by the third day of the month. Though we don’t have closed books or full financials yet, the prior month is done, giving us lots of new information on the business. The purpose here is to get an early view of key results from the prior month on a timely basis.
The benefit: faster and more nimble decision-making. We can address problems more quickly. We can see opportunities where we need to adjust, for instance add requisite staff to work on an upcoming glitch. This allows us to see and course-correct sooner.
- Revenue Cuts and Comparisons. The FlashPak focuses on top-line information. We don’t have full gross margin information until we get the full close, so we focus more on revenue. We look at last month’s revenue compared to budget, compared to the prior month. We look at year-to-date (YTD) revenue vs. budget and analyze variances. We also review revenue by geographical location as well, and what’s happening relative to budget. We compare to the prior year to see if there’s any cyclicality impacts. Finally, we look at Revenue per Client as a metric to see if the characteristic of our clients or our work are trending in a certain direction…
If a number is variant to budget or to the prior month in a trend, we can ask, “What happened?” When surprises happen, we’re getting this information quickly.
- A/R and DSO. Secondly, we revisit the A/R in the Days Sales Outstanding. And we look at A/R by location. We want to ask, “Is a certain location of the business not paying attention to A/R as much as another location?”
- Cash Cash Cash. Any good startup is always keeping an eye on cash and making sure that there are no unusual surprises with our month-end cash balance
- Operations. We review how many employees and how many clients we had in the period.
Looking over all this information goes pretty fast on our monthly call. Because we have the weekly scorecard and we’re keeping up, we’re pretty attuned to what these numbers are going to be. We can go through the entire FlashPak in about an hour and glean these insights. We’re not guessing. Then, when the numbers are final, we can leverage those for discussion at a more strategic level.
3. The AVL FinPakTM (Monthly)
The FinPak is delivered by about the 20th of the month. This is the fully closed financials with the full financial analysis of our business. We set up a two-hour meeting once a month to review this in detail.
I’ll reserve my comments about the detailed contents of the AVL FinPak for another post, but for now, here’s a link to a general example of a core FinPak.
Governance/Analytics. The FinPak has a slightly different purpose than the FlashPak. The latter was about quick knowledge, decision-making and course-correcting. The FinPak gets into governance. How are we running the business? It relates to controls. Certainly, it relates more to gross profit analysis because we have that information now, as well as detail review of our operating expenses.
We really look at how we spent money. For instance, we do a detailed review of our marketing and business development spending and we review the balance sheet in much more detail than looking at just cash and A/R. We examine more components in greater detail.
Reforecasting. Since our FinPak has all the actuals to the current month, we update our projected 12-month forecast each month. We revisit what we expect to happen going forward. That’s one of the key benefits of the FinPak. It not only gives us robust controls and governance so we can say “these are good financials,” it also lets us look to the horizon and the outlook of the business. Then we can see, based on the trends therein, what we can expect.
Combining that historical, analytical component with reforecasting becomes a huge asset for us as a business, to be looking ahead in a cognizant, disciplined way.
4. Client Master File
The last component we use focuses on a strong dataset of information about our past and current clients. The client master file gives a snapshot view of our current client makeup as well as a trend view that shows how that makeup is changing.
As a financial consulting firm for growth businesses, we track things like client industry, size, development stage (because that’s key to our business offerings), and location. We note if they’ve raised capital, and perhaps how much they’ve raised.
The CMF gives us a longer-term strategic view to what’s changing within our client makeup. Then we can ask why, or “Is that good or bad?” Additionally, our CFO produces analytics around the client master file to point out to the management team, “Here are the shifts I’m seeing.” We can see, for instance, that we’re doing more work in a certain industry over a year ago.
The CMF comes in handy in other ways too. When someone asks me how many clients we are currently working within a certain industry, I can find that number pretty quickly. That might help us in a sales proposal. I can also query who among our clients is using a certain software package to do X, Y or Z. That information gives us a credibility advantage as well as supporting our marketing efforts.
Maintaining the Reports
You might ask: “What tools and systems are you using to capture all this, Schwally?” Well, today it’s a well-oiled process and fairly condensed, but all of this is in Excel or Google Sheets. We pull information out of our systems and drop it in, in a very controlled/disciplined way. These tasks are fairly benign in terms of time requirements, and worth it.
In the future, I’d love to explore the value for AVL of using a business intelligence tool like Tableau or other software. It could help us do more real-time analytics more easily for our team. But for our current size and stage and complexity, we have our processes, and they work quite well.
Overall, that was a pretty short list of reports. They’re highly refined, however, giving crucial information. They’ve been reworked over a period of years and the cadence when they’re reviewed is very strong.
Using these reports weekly and monthly creates a very high level of business information among our management team in terms of how the organization is running. What reports does your business need to run well with great visibility?