Board Reporting: Why It’s Important and How to Do It Properly
In an age where companies are consistently being scrutinised by national regulators, board reporting has become more important than ever before. Regardless of your company’s size, ensuring that information is properly conveyed to the board of directors is essential for the organisation to work properly and legally.
Boards will generally perform to the best of their ability when they receive high-quality reports. That’s because they’ll have enough information to make good decisions and develop both short-term and long-term strategies. As such, good board reporting requires accurate, timely and relevant information presented to them in an ‘easy-to-digest’ way.
This article will outline what you need to know about board reporting, including why it’s important and what should be focused on in the reports you publish.
What is board reporting?
‘Board reporting’ refers to the preparation and publishing of ‘board reports’ – which contains information that is delivered to the board of directors of a company.
The data and information contained within the report is then used by the organisation to make decisions about the company’s future – including both immediate moves and also long-term strategy.
Financial reports are often one of the most important types of reports that a board will have to consider.
Who prepares board reports?
Exactly who prepares and submits board reports may differ from company to company. However, generally, standing committees will be responsible for submitting reports at each meeting of the board.
These standing committees will usually consist of:
- Executive committees
- Finance committees
- Development committees
Other committees may also deliver reports, and some may not even by standing. Ad hoc committees may be created to report on a particular issue within the company to the board.
These committees will normally be experts in what they do. For example, a finance committee will typically have experienced accountants within them. A marketing committee may also have experienced brand strategists or social media consultants in them.
Summaries will typically be presented by an executive director or the CEO, and signed by either that executive director or the secretary.
Why is board reporting important?
Board reporting is important for a number of reasons, which we’ll outline below in further detail.
Communication of information
Board reports published by committees will bring the board of directors ‘up to speed’, so to speak. They’ll inform the directors about what the committee has been doing, and what the present state of affairs is. This may include the financial status of the company, or the status of an important project that the company is involved in.
The board can give feedback, input, ask questions and ultimately obtain what they need so they can make decisions that affect the company’s future.
Board reports will often be called on if a legal issue arises, as they can present useful evidence if a company is investigated or sued.
For example, if a director is alleged to have allowed their company to trade while insolvent, the director may wish to rely on a board report to state that they were relying on information presented to them in a report published by their finance committee.
Depending on the type of board report, the information communicated within them may go towards the broader strategic planning of the company.
- A financial report outlining how the company is performing against its budget may determine whether a company decides to make an investment
- A report on the status of the project may determine whether a company decides to continue, delay or completely cancel down the project
- A report on the company’s marketing strategy may determine whether the company chooses to continue using a particular type of marketing tactic
This is why the information contained within a board report must be as accurate as possible, as the data contained within them may be the difference between a company doing something, or not doing something.
Common problems with board reporting
From experience, we’ve noted a common thread of mistakes that companies often make when they are reporting to the board. Some of these errors include:
- Playing hide-and-seek. Key messages often fail to stand out because they are buried in the detail. Board members are busy – and they might miss something critical if they’re looking for a needle in a haystack.
- Writing ‘War and Peace’. Board packs will often be too long, and sometimes fail to have an executive summary.
- An unclear action plan. Many board reports won’t have a ‘Next Steps’ section, and it may be unclear what the board actually has to do with all the data before them.
- Not using templates. Many board reports fail to use standard templates, which have specifically been developed to help directors know where to look when they need important information.
- No training. Often, people tasked with writing board reports are never given training on how to do so properly.
- No feedback is delivered. Feedback is often not delivered by the board to management on committees on the quality of the reports they write. As a result, the standard doesn’t usually get any better,
- Board reports are delivered late. Sometimes, boards will receive board packs too late in the game and will not have enough time to properly read them before the next meeting.
To help alleviate these mistakes, we’ve develop some pointers below on how to write your next board report.
How to write a board report (properly)
Every board report is going to be different. This is because every report is unique. However, committees and drafters should focus on adopting the following strategies when preparing them.
- Write for the audience
Committees should focus, first and foremost, on their audience – i.e. who they are speaking to. Board members may all have different backgrounds and specialties, and this will inform your emphasis on certain points in the board report.
If the board members are heavily involved in the business, for instance, there is no need to explain the inner workings of the company to them. By contrast, if they are non-executive directors and aren’t involved in day-to-day operations, contextualised explanations of how the company works would be useful.
- Use the correct language
Board reports should focus on using appropriate language so that members of the board can easily refer to them. This, again, ties into the nature of your audience.
If your board members are heavily detail-oriented and need technical language in order to achieve their objectives, then you should use that language. But if they only want to digest the details quickly, then there is no need to use overly complicated language that slows the communication down.
- Paint the whole picture
Board reports must provide the appropriate focus on both the good and the bad sides of the business. Members need to know the true state of the organisation they lead – so tell them what they need to hear, not just want they want to hear.
While nobody likes to be the bearer of bad news, board reports will often have to do this if necessary. Inform members about internal and external pressures on the project or whatever the topic may be, so that the board can make the best decision possible.
- Focus on critical points (but don’t ignore analysis)
The board report shouldn’t be a game of hide and seek. Ensure the most important points in the report are captured in an executive summary, graphs, tables, bullet points, headings and other ways to ensure the message is clearly conveyed.
That being said, the board will need to understand the data in front of them. The report should provide a clear analysis of the data, so that they can have a firm grasp of what issues and risks present themselves. Analysing the data will allow board members (who are usually very busy) to quickly grasp the key points as opposed to digging through the data themselves.
- Conclude with an action plan
The board report should ‘wrap up’ with a section advising the board on what to do next. At the end of the day, the drafters are the experts. So they should come up with a proposed solution, based on their findings and the data they’ve analysed, to ensure the company makes the best decision for its future.
The board reporting experts are here to help
If you have any queries about the information above, or need help drafting your next board report, please get in touch with the experts at 2account.
Financial reporting is our specialty. We’ve helped finance committees, directors and managers prepare high-quality reports that members can use to make critical decisions that significantly affect their organisation’s future.
Our virtual CFO services and can ensure your board is properly informed of the financial status of your company every time its members meet – so if you’re looking to improve the quality of your board reporting, get in touch with our team today.