Successful Accounting & Finance Organizations in Technology Companies, Part 2 - Planning and Reporting Cadences

The role of Accounting and Finance organizations within technology companies has evolved in the past decade.  As business models become more complex, investors, executives, and leaders increasingly turn to accounting and finance to help understand the past and advise for the future.  In this dynamic environment, how do you set up your accounting and finance team to best steer your company?  

In Part 1 of this blog series, we focused on organizational structure and how to create one that best supports your business. 

In Part 2, we will focus on planning and reporting cadences.  In particular, we’ll discuss content and objectives in annual, quarterly, monthly and weekly reviews.  

In our final post in this series (forthcoming), we’ll discuss other processes and tools that you’ll want to put in place.

Before we dive into the specific cadences, one thing to note is that these general activities can vary greatly depending on the type of business you’re operating.  A hardware intensive business will differ from a software business which will differ from a services business.  As expected, a newly public company will have different cadences than a Series A startup.  Keep that in mind as you think about your company’s review cadence.

Let’s start with the annual plan since this is usually the longest time frame companies will create a financial plan.  It should come as no surprise that the annual plan and budget will contain the highest level goals for an organization.  Typically, these are directionally correct but the fidelity for any specific period within the year may be low.  

In your company's annual plan, prioritize the key big rocks you definitely want to accomplish, quantify the revenue and costs associated with them, and then fill out the rest of the budget.

Given the strategic nature of the annual plan, oftentimes only executives and the top one or two leads in each department are involved in the planning phase.  Managers and individual contributors should have the opportunity to review and give feedback, but the original creation is usually limited to a few people at the company.  Coming out of an annual budgeting cycle, leaders should have a good grasp of the 3-5 key goals for the year and the associated financial implications.

Once you’ve established your top level objectives and corresponding financial impact for the year, each of the subsequent reviews will want to connect (or tie) to those goals.  If possible, try to make the goals connect quantitatively.  For example, if your annual goal was to create 10 widgets, you may have a quarterly goal to create 3 widgets.  

At the quarterly cadence, the metrics you’re using are still relatively high level so you don’t create false precision.  

What’s unique about the quarterly review is that this is usually where details start to be discussed but the overall review is still relatively high level.  For example, specific design, product and engineering milestones are often established on a quarterly cadence.  Additional priorities to be taken care of at a quarterly cadence include major revenue model or customer strategy adjustments and any key personnel decisions.  All of these items can translate into financial impacts for the company, so it’s important to keep track and understand how they manifest into your metrics.

As we move into the monthly and weekly cadence, this is where the details really come into play.  

It’s important to set clear expectations with leadership and the broader organization on what type of data will be reviewed, and what’s generally not a good use of time to regularly dig into.  For example, while no one will expect the CFO to memorize a single month’s vendor transaction when doing annual budgets, these questions start to pop up in monthly and weekly reviews.  Set the expectation with your teams about what will be reviewed on a regular monthly or weekly cadence, and what needs to be done separately (e.g., transaction reviews).

While a typical monthly review package will contain aggregate financial metrics and comparisons, it will likely also include content on top transactions and events.  For example, if there was a big hiring push in a particular month, who are the new employees and what are their average salaries?  Something to keep in mind is that seasonality may impact a specific month more so than any quarterly or annual financials.  Seasonality may be a focus of the conversation in order to help understand trends.  In monthly meetings, decisions include shifts in business strategy and reallocation of resources within the company.

Finally, we get to our most granular reporting cadence, weekly.  Many finance teams will spend a fair chunk of Monday trying to capture a KPI summary of the prior week, and that’s totally normal.  These updates can be pretty granular (specific Line of Business, Location, etc) and skewed towards business metrics.  Oftentimes teams are looking for leading indicators to give a signal about whether or not the monthly and quarterly predictions are likely to happen.  While teams typically don’t want to spend resources getting full financials compiled on a weekly level, there are enough data points to still make these reviews super valuable for decision makers.

The general trend in finance and accounting is that data is being evaluated on a shorter time interval.  With the help of technology and tools like Sudozi, many insights that previously could not be compiled on a weekly cadence due to bandwidth can now be surfaced in shorter time intervals.  It’s more important than ever to prioritize what data is actually relevant to be evaluated in a short time interval and what actions should be taken depending on those results.  Establishing a good framework and finding the right tools for that will help your team take full advantage of the increased data available.