One of the biggest challenges of growth is that the bigger your creative business gets, the more people you need to keep happy.
Investors, lenders and other stakeholders need to feel you’re on top of things and reassured that the numbers stack up. If they’re not, they’re liable to start fretting and asking lots of questions.
That’s why the most effective business leaders don’t react to queries – they present reports that answer questions before they’re asked.
I won’t lie, I hesitated before using the word ‘proactive’ above. It’s a bit ‘business jargon bingo’, isn’t it? It gets overused and in a lot of ways has lost its meaning.
But I reckon in this specific context, it is the right word. We’re talking about being two steps ahead, tackling problems before they even think about arising. It’s a whole different mindset.
How does reporting help?
Uncertainty makes people anxious. Without a flow of information, there’s a void that we’re left to fill with our own worst fears.
When it comes to business accounting, stakeholders want reassurance that money is coming and going from the business as expected.
It’s fair to say that in 2020, when everything has been upended, that’s all the more true.
Some creative businesses and marketing agencies have had surprisingly good years with the shift to digital.
Others, especially those reliant on in-person events, have struggled.
What they all have in common is that nothing has gone how they expected when they put together their business plans and budgets back at the end of 2019.
Put yourself in the shoes of an investor or lender – what would put your mind at rest? More frequent, more detailed reports would certainly help.
If nothing else, they send a signal that there’s nothing to hide – transparency projects confidence.
Proactive reporting in practice
So, you’re convinced it’s a good idea, but how do you go about achieving it?
First, you need good reports, which in turn means you need clean, tidy books which provide a single, accurate version of the truth.
Next, you need a well put together accounting system which will enable you to generate reports from that data.
Anytime you’re entering information manually or copying and pasting, you’re introducing an opportunity for human error – which is part of the motivation behind the Making Tax Digital (MTD) policy.
Third, you need time and space to provide a meaningful commentary. Basically, you want to anticipate any questions you’re going to get and answer them – here we go again – proactively.
Again, I’d advise you to be honest and highlight negatives, not just positives. Doing that, and saying what your plan is to fix any issues you’ve noticed, goes a long way to building trust.
Next, you’ll want a long-term plan that establishes where you want to be and KPIs that will allow your performance against those goals to be measured over time. This won’t necessarily be just about your financial position, although profit/loss, average revenue per customer and other such numbers will usually be in the mix.
Finally, you need to establish a regular routine and process for sharing reports. In my experience, if you can commit to delivering your reports at the same time, in the same way, you’re less likely to get chased for updates.
It also sends a message that you’re organised and in control.
How often you need to report will vary from business to business but monthly is fairly normal. Quarterly can also work, especially once you’ve established trust and your stakeholders don’t feel the need for constant reassurance.
In some cases, though, it might be necessary to report weekly, especially if your investors, lenders or partners are very hands-on.
Real-time reporting via the cloud
Increasingly, of course, there is an alternative that goes one step beyond proactive: you can give people access to a reporting dashboard via Xero or whichever cloud accounting software you use.
This is the ultimate form of transparency and can work really well with investors or partners with whom you have a close working relationship.
The downside might be that, without commentary, the numbers they see prompt more questions or concerns. But as long as you’re using Xero methodically and keeping it up to date, the chances are they’ll find the information they need without bothering you at all.
Attention to detail matters
If the point of the exercise is to build trust and reassure stakeholders, you need to check, double check and then check again.
It only takes one error to make people wonder if they can trust the rest of the report, or any of your reporting at all. Once someone has decided you’re careless or, worse, trying to pull the wool over their eyes, it can take a long time to repair the relationship.
If possible, get someone with fresh eyes to review your reports before they go to stakeholders. Or, even better, get someone else to produce them for you to review.
We can help you get your reporting systems set up and running smoothly and advise on KPIs, business plans and more. Get in touch to get the process started.