By Amber Stout, Warren Averett
For many businesses, financial review meetings focus on what happened last month. Revenue was up or down. Margins changed. Expenses came in higher or lower than expected. The reports get reviewed, the numbers get discussed, the meeting ends and the day resumes.
But reviewing past results and making future decisions aren’t the same thing. You may have seen reports full of numbers relevant to your business, but how do those numbers impact your plans for next month? What do they mean for the organization’s goals? What should you do or change in the business as a result?
Most financial review meetings already answer the question: What happened? But to use your financial information to truly inform a forward-looking strategic plan, add these extra questions to the agenda.
Why does it matter?
Knowing that a number changed in your reports doesn’t explain what caused it (or whether it requires any action at all). Not every variance deserves the same level of attention.
On one hand, a small increase in office supplies may not affect any decisions. On the other hand, a decline in revenue or cash flow could affect hiring plans, equipment purchases, cash reserves, vendor payments and growth plans.
What does a variance change for the business? If the answer is “nothing,” it may not require further discussion. If it affects an upcoming decision or a set goal for the company, it deserves additional attention.
Who does this affect?
Financial data rarely tells the entire story on its own, so it’s important to bring the right people into the conversation. Finance may see margins declining. Sales may know discounting has increased. Operations may be dealing with higher costs.
When each department is working from its own information, it becomes difficult to understand what is driving the result. Bringing those perspectives together often reveals causes that aren’t obvious from the financial report alone.
What should happen next?
Strategic planning doesn’t require a complete solution during every meeting. Sometimes, the most important outcome is simply identifying the next action that would create progress in the right direction. If margins are declining, it may be time to review pricing or costs. If cash flow is tightening, spending plans, collections activity or upcoming investments may need a closer look. You don’t have to leave every meeting with 20 new recommendations, but you should be able to identify the issues that deserve attention and determine what happens next.
Move from reviewing financial reports to making informed strategic choices.
Understanding your past financial data is important, but strategic planning for the future only starts when the conversation moves beyond the numbers and focuses on the decisions those numbers affect. And that conversation is often more valuable than the report itself.
Digging a little deeper allows you to move from reviewing reports to using reports, so you can actually apply your financial data to your company’s decisions.
Amber Stout is a Member and Service Area Leader of Warren Averett’s Client Accounting Services Division.
