The Ideal Financial Reporting Tempo For A VC-Backed Company

Over the past few days, I’ve had a similar conversation about reporting tempo with three different people (2 CFOs and 1 CEO). In each case, we snuck up on the issue, rather than starting with it.

The fundamental question addressed what the reporting tempo to the board should be.

A number of years ago, I decided to shift to quarterly board meetings. Historically, the number of board meetings I had per company was all over the place. Some had four per year, some six, some eight, and some had twelve. This was an artifact of the last 30 years of venture capital, where VCs often would use the board meeting as the way to primarily engage with the company.

I wrote about this in my book Startup Boards: Getting the Most Out of Your Board of Directors. I’ve shifted to a cadence I call “continuous board interaction” which is gated by the desire and need of the CEO as well as the needs of the company. As such, a quarterly board meeting is plenty since I’m having continuous interaction with the CEO and board. This approach was originally stimulated by Steve Blank’s posts Why Board Meetings Suck and Reinventing the Board Meeting – Part 2 of 2 but modified to fit the more varied and flexible reality that I operate in.

This does not mean that quarterly financials work for me. When the financials are tied to the quarterly board meeting, it’s almost impossible to have continue board interaction. There’s just not enough financial context about what is going on in the business. On the other hand, with a few exceptions (hyper-growth cases or ones where you are focusing on specific metrics), daily financing reporting is not helpful either, as is it overly burdensome on the company. It also quickly turns into metric reporting, which is very distinct from financial report, and often extremely helpful, especially in a continuous board interaction approach. However, many board members can’t handle daily anything, especially if they are on ten boards, except for the companies that they need to spend daily attention on.

That’s the context for how we wandered up to the discussion in each meeting. After the second conversation, I thanked the person I was talking to (she knows who she is) for providing the content for today’s blog post. Of course, since the conversation came up again with someone else after that, it sealed the deal that this would be a blog post.

Here is how I like to do board level financial reporting for private companies I’m on the boards of. I don’t force this – if the CEO wants to do something different that’s up to her. But I encourage this, or something like this.

Quarterly board meetings: The financials are decoupled from the board meeting. There is a quarterly financial and metric review in the board meeting, but it’s not the meat of the meeting unless there is a specific set of financial issues that need to dominate, such as the 2017 budget, a big financial miss, or a significant change to the plan for some reason.

Monthly financial package: This is a full financial package distributed to the board and executive team. It includes P&L, Balance Sheet, and Cash Flow statements. It has actuals to budget for monthly, quarterly, and YTD. It also has trailing 12 months of each (P&L, BS, CF). In addition, there is a cover MD&A (hopefully written by the CFO – not a formal SEC one, but a comprehensive management discussion and analysis). I prefer this package to be distributed by the CFO and not the CEO – it then becomes part of the operating rhythm. I also like the Q&A that occurs (in email, or in a Google doc around the MD&A) to be driven by the CFO with support from the CEO.

Optional monthly financial state of the company board call: This is a call with the CEO, CFO, and the board. Ideally it is led by the CFO. It’s limited to one hour, is completely independent of the board meeting, and is optional. The CFO sends out a short (less than 10 page) presentation summarizing the key financials, key metrics, and any topics for discussion at least two days in advance of the call. While I rarely attend these, I find that the board members who don’t engage continuously can use this to keep current on the financials and in the rhythm of the company.

This rhythm works around the monthly financial close cycle. The CFO sets the schedule. An example would be (based on day of the month) that the financials are closed by day 15. The monthly financial package goes out on day 17 with the presentation for the optional monthly state of the board call. The call happens on day 20.

If you’ve got a different, or better, rhythm, I’d love to hear it.


Also published on Medium.

  • Tom Kerestes

    Great read, as always. Thank you. Do you have a minimum size or stage company in mind for when this kind of financial tempo is recommended? Or do you think it should be considered for all companies that have received any level of VC funding?

    • I start from the beginning and build the muscle.

  • Sean Jackson

    Brad, interesting how this post dovetails into our discussion (comments) on the 3 Machine Framework 🙂

    I think the rhythm you outline is spot on, provided that the company has invested in the financial reporting process for both systems and overall data reconciliation. But once done, it make this pace of reporting much easier!

    But one question to append to this. How do you incorporate long-term forecasting into this rhythm?

    Obviously comparison between budgets to actuals on a quarterly basis matter, but would you also expect updates to future projections be made quarterly, semi-annually, or annually?

    Curious on the rhythm of financial forecasts.

  • Sam

    Thanks, Brad. I’ve “pocketed” and will come back to this.

    This stood out to me, though: “the companies that [board members] need to spend daily attention on.” Had not considered the possibility of daily board member attention.

    Curious… Other than pending IPO or insolvency, what other situations would lead to daily board member attention?

  • I pretty much agree, Brad. Lines up with way I’ve handled the the reporting at companies I’ve been involved with.

  • Totally agree Brad. Our startup (Jirav.com) is trying to help enable this exact financial information cadence within SMB too. We just unveiled it at Alchemist Demo Day last week – would love to get your and other CFOs thoughts on our approach if interested.

  • Rob Balgley

    Metric reporting has become an increasingly important tool for me and I find that pairing it with my financial reporting provides a very helpful ‘color commentary’ to go with ‘the play by play’ that financials provide. Not sure if you’ve written about KPI/metric reporting – but that’s where my BOD and management teams interests seem to converge.