Managing the financial performance of your business may sometimes seem like steering a ship through treacherous waters. Perhaps your voyage goes smoothly for a while until, quite suddenly, you hit a concerning dip or abrupt swell — either of which creates considerable operational pressure.

Your financial statements should provide keen insights into how your company is performing and where it’s headed. However, you probably generate them only monthly, quarterly or annually. That leaves lots of time in between when you may be sailing through a fog of uncertainty. Creating flash reports is one way to shine a light on the situation.

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 imperative 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 us for help developing flash reports, evaluating your current ones or improving any aspect of your financial reporting.

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