Over the last few months, we've been talking about Financial Reporting.

Today, we wrap up the series and introduce you to 16 ways you can think "outside-the-box" to improve your reporting.

If you were forwarded this email, my goal is to share one thing each week that changes the way you think about money.

But first, our sponsor.

Stop Settling for Less

Earn interest in a Business Checking Account, subject to rate sheets​

Remember the days when interest rates on bank accounts were less than 1%?
For most of my adult life, it seemed impossible to get an interest-bearing account for a business.

But now, with inflation spiking and short-term treasuries providing a higher yield, not having your funds in an interest-bearing account means you're implicitly losing out on money because you’re not earning that yield.

But that local bank you work with? Do they have a high-interest account? If they do, do they make you jump through a bunch of hoops to access it?
Perhaps you face wire fees. Or, perhaps their yield is limited to a savings account.

Enter Meow. (Meow is a financial technology company, not a bank.)

Meow finds banks that are willing to pay interest on business checking accounts, along with other awesome features:

1. Free ACH and wires
2. No withdrawal fees
3. ​Easy account application (10 minutes)

APPLY TODAY

Meow is a financial technology company, not a bank or FDIC Insured Depository Institution. The banking services described in this message are provided by Grasshopper Bank, N.A.; Member FDIC. See meow.com/rate-sheets for additional terms.

​

Want to advertise to 40,000 small business owners and leaders? Go here.

16 FRAME-BREAKING METHODS TO 10x YOUR FINANCIAL DECISION-MAKING

Over the last 9 weeks, we’ve broken down the foundations of ReportingOS. When I started this series, I expected it to only go on 5ish weeks, but as is normal, I bit off more than I could chew.

We talked about:

1. ​Common financial reporting failures​
2. ​The financial basics/foundations​
3. ​Revenue & profit drivers​
4. ​Cash flow drivers​
5. ​Reporting building blocks​
6. ​How to run a good financial meeting​
7. Turning financial data into better decisions (part 1 & part 2)​

We're going to wrap up today by offering some unconventional methods to improving your financials. We’re going to look at 4 ways to improve you reporting and offer you multiple methods to achieving this.

The four things we’re looking at are how to:

1. shrink your reporting package
2. create a narrative
3. make your reports action-oriented
4. improve your financial analysis

Let’s dive in.

SHRINK YOUR REPORTING PACKAGE

It’s so easy for your monthly reports to grow from 5 pages to 10 to 20 to 30. Before you know it, you’ve got so much info even a full day meeting wouldn’t be enough to sort through it all.

To counteract this, build mechanisms into your reporting that force you to limit the size. These can also be applied to metrics, so consider that path as well.

Below are some unique ways to do this.

Create a “Two-Page Rule” for reports

If a report takes more than two pages to get the point across, it’s a bad report. In each reporting package, you want an executive summary then a stack of reports behind it.

If either the summary or reports runs more than two pages, it’s time for some culling. And this doesn’t mean reduce the font size. Everyone hates that guy.

Randomly remove a report or metric

The reality is that reports get produced for a specific point in time, then forgotten about and never looked at again. But if you were to ask leadership if you could stop producing it, they’d likely push back.

To counter this, randomly remove a report from a package and see if anyone asks about it. If you do this three months in a row and no one asks, just stop producing it.

Create a kill a report/metric schedule

The only way to counteract one new report after another is to create rules about removing reports from your reporting package.

Every 90 days, either implement an “eliminate one report rule” or a “reporting package audit” to force critical thinking about each report in your package. I’d encourage an elimination rule, because it’s the only way to force your team to take action. Otherwise, they’ll find a reason to keep everything.

Then annually, review your package in light of your strategic objectives.

CREATE A NARRATIVE

Some people love numbers and others don’t. Creating a narrative helps both, so it’s a no-lose situation. The numbers people generally don’t do a good job of zooming out and thinking of the story of the report, so a narrative forces this thought pattern.

For the non-numbers people, the narrative helps them digest the report and see the most important trends.

Below we have four ways to improve the narrative and story told with your financials.

Report in “Plain English” first, numbers second

Before each report, require a 2-3 sentence summary in plain language. You can require specific framing (such as the bad, the good, and the best) or leave it open to their interpretation.

You can do that for both the reporting package AND individual reports.

As a bonus, don’t attach a narrative to the report and require everyone to review the reports before the meeting, then come prepared with a 2-3 sentence narrative on the reporting package. This will help them look for themes. The variety of answers would be interesting, and it could create some interesting conversations on why everyone chose what they did.

Send Reports as a “Voice Memo”

Sometimes a different medium brings out different insights. I love to write, but I find when I’m forced to verbalize what I’m writing about, the approach often changes.

One of my favorite “games” is to explain what I’m writing about too my wife. I often find it’s too complex and the general idea is hard to get across.

Voice memos require you to think in terms of themes and help highlight when you’re going too many directions.

Force the team to create a 2-minute voice memo summarizing the key takeaways. It works the brain in a different way and will likely lead to some changes in insights.

“Deep dive” meetings

Instead of doing the traditional wall of numbers and pray approach, require each department (or responsible party) to prepare a narrative or deep dive on their most important financial trend or metric.

The beauty of this method is that it not only requires each department or group to determine what they think is most important, but also “go deep” on this one item. Over a series of months, this approach would likely result in you getting a much deeper dive on the top 3-5 metrics than you could have otherwise gotten.

The “no-numbers” report

Could you produce a financial packet without numbers? Only written insights?

I’m not sure I could, but it’s an interesting exercise to run. If you find your team is struggling with insights, force a no-numbers reporting period. They can only bring slights/reports that focus on narrative and action instead of numbers.

Obviously you wouldn’t want to do this all the time, but it’d be a great way to break the traditional framework that people operate under.

MAKE YOUR REPORTS ACTION-ORIENTED

One of the biggest beefs people have with meetings is that nothing gets accomplished. And that's really easy to do with a financial reporting meeting. You spend a lot of brain power just trying to understand the reports, so you don't have much left for action.

So, to get the most out of these meetings, we need to find ways to build that action into the meeting structure.

Add a “Next Steps” section to the bottom of each report

A report that can’t lead to action is a pointless report. So, to combat this, force action based on every report you produce. Keep track of those actions and track them meeting to meeting.

As a bonus, use a three-strike rule to eliminate a report from your reporting stack… three meetings in a row and no “next steps?” Remove it from your reporting because it’s clear it’s just wasted paper.

Ask “What Would Break First?”

Instead of just reviewing numbers, use the reports to stress test your business.

If revenue dropped 30%, what would break first? If our supplier cut us off, what happens? If we lose client x, would we survive?

Reporting isn’t supposed to just be a view of the past, but insight into the future.

Thinking through these scenarios helps you better understand the numbers and your business.

Red-flag a number every month

If you can’t find at least one thing to do a “deep dive” on in your financial reports, you’re not looking hard enough.

Force yourself or your team to find one metric to actively do a deep dive on and problem-solve. Sometimes there won’t really be a “problem” but often there will. By turning the meeting into a problem-solving session, you’re forcing immediate action and fixing something in your business.

If you do this every month, you’ll have fixed 12 things in your business over the course of the year. That could be completely transformational.

FRAME-BREAKING ANALYSIS

It’s easy to fall into a routine or rhythm of analysis. This is good, because it shows you have familiarity, but it can also make you blind to trends that pop up.

To break yourself out of the bad side of this mental routine, force yourself to go through the exercises below.

Remove $ signs from

I often hear that it’s hard to differentiate reporting from one month to the next. It feels like groundhog day. We see the same numbers and have a hard time getting insights.

Instead of numbers, present percentage-based reports. Replace all numbers with percentages and see what different things stick out. Try basing all your numbers (Income Statement, Balance Sheet, and Key Metrics) off revenue, profit, or cash. Then, compare it to historical and/or industry numbers.

This will help you focus on trends and efficiency over the pure dollar amount of the raw numbers.

Hide the revenue line & see what happens

It’s easy to become revenue-blind and miss other key trends in your financials. By removing it, you’ll force your team to focus on costs, profitability, and cash flow instead.

Pair this with the percentage based reporting so you don’t base all percentages as a percent of revenue and you’ve got a really unique way to view your reports.

Run a reverse budgeting exercise

As we just discussed, it’s easy to start and end with revenue. To take the focus off revenue, do a reverse budgeting exercise in your forecast to rebuild your business from scratch. Consider, what profit do we want? Once we decide this, we can assign costs that we think are appropriate.

We then work backward to the revenue required for this. You can also insert revenue and create an “unreasonable” profit requirement, which will force rethinking all expenses.

Each of these force you to think outside your traditional box and reconsider the assumptions you’ve previously made and assumed are always true.

Play “guess the outcome”

You don’t “know” a number until you can understand how you can impact that number going forward. To build this muscle, you can play a few versions of this game:

1. Have leaders view one part of a report or reporting packet and guess the number in another area.
2. Have the leaders guess future outcomes based on today’s numbers. You can even do this with today’s forecast. “Based on today’s cash, what are we forecasting in 3 months?”

Whether predicting future numbers or guessing them today, keep score and see how different staff members do. By creating a competition of it, you insert fun and seriousness to it.

Over the long term, it’ll expose gaps in the intuition of the team, make the reports more interactive, and help everyone get a deeper understanding of the numbers.

Send an AI or outsider a report for feedback

Sometimes you just need different eyes on the reports. Send the report to a trusted friend, paid consultant, or run it through AI. Give it/them very little context to start and see what they come away with.

Allow them to ask clarifying questions, then hear how their answers change.

If someone can’t view it with this limited context and get insights, it’s likely your reporting is too complicated.

Swap jobs

We’re so used to our perspective that when we see something from a different one, it often looks foreign to us. Have a non-finance leader explain the financial reports to the team, then have the finance team offer feedback.

This helps the finance team see what others are seeing, which will highlight the issues in the reporting. But it will also help the non-finance leaders understand the financial way of thinking.

It’ll provide new perspective, which will lead to clarity and simplification of your reports.

—

I’d encourage you to give one of these a try next time you go over your financial results.

Let me know:

1. Which one are you going to try?
2. Do you have any other unique ones you’ve tried before?

‍