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CFO Playbook: Preparing financial statements for board meetings

CFOs should be viewed as trusted advisors, providing insights and opinions based on their financial expertise.

CFO Playbook: Preparing financial statements for board meetings

Financial statements are crucial tools that provide insights into a company’s financial performance and position. For CFOs, preparing financial statements for board meetings is a critical responsibility. Effective communication of financial information to the board is essential for making informed decisions and ensuring the company’s success.

Financial statements are documents that present the financial performance and position of a company. The three main financial statements are the balance sheet, income statement, and cash flow statement. These statements provide a snapshot of the company’s financial health and are crucial for decision-making.

  • Balance Sheet: The balance sheet provides a snapshot of the company’s assets, liabilities, and equity at a specific point in time. It showcases the company’s financial position by detailing what it owns (assets), what it owes (liabilities), and the residual value for shareholders (equity).

  • Income Statement: The income statement, also known as the profit and loss statement, shows the company’s revenue, expenses, and resulting net income or loss over a specific period. It highlights the company’s financial performance by detailing its revenue sources, cost of goods sold, operating expenses, and other income or expenses.

  • Cash Flow Statement: The cash flow statement tracks the inflow and outflow of cash in the company over a specific period. It provides insights into how cash is generated and used, categorizing cash flows into operating activities, investing activities, and financing activities. It helps assess the company’s liquidity and its ability to generate cash.

Other financial reports, such as the statement of retained earnings and various financial ratios, can also provide valuable insights into the company’s financial performance and position. CFOs must have a deep understanding of these financial statements to effectively prepare and present them to the board.

The importance of transparency and alignment

Transparency and alignment are crucial when preparing financial statements for board meetings. CFOs must ensure that the information presented is accurate, reliable, and transparent. Here are some key considerations:

  • Know the Numbers: As CFOs, it is essential to have a solid grasp of the company’s financial data and accounting principles. This includes understanding where the numbers come from and being able to explain them to the board in a clear and concise manner.

  • Align with the CEO and Management Team: Before the board meeting, CFOs should connect with the CEO and management team to align on the key financial metrics, strategies, and goals. This alignment ensures that everyone is on the same page and presents a unified front to the board.

  • Coordinate with General Counsel (GC) and Human Resources (HR): Collaboration with the GC and HR teams is crucial to ensure compliance with legal and regulatory requirements. CFOs should work closely with these teams to address any financial or legal concerns and provide accurate information to the board.

  • Preview with the Audit Committee Chair: Building a strong relationship with the audit committee chair is essential. CFOs should discuss the audit committee’s areas of interest and specific financial information they would like to see. This proactive approach helps avoid surprises and ensures that the board receives the necessary information.

  • Work with the CEO on the Agenda: Collaborating with the CEO on the meeting agenda is crucial to control the narrative and ensure that the financial information is presented in a clear and organized manner. By aligning with the CEO, CFOs can help script the CEO’s remarks and ensure that financial terms and concepts are accurately communicated.

  • Dispel “Fear of the Unknown”: As the CFO, it is your responsibility to stress test financial models and understand the assumptions behind them. By identifying potential risks and worst-case scenarios, you can eliminate the “fear of the unknown” and provide the board with a comprehensive understanding of the company’s financial position.

CFO co-pilot:

As I prepare the quarterly financial statements for the upcoming board meeting, I reflect on the critical role I play as CFO in communicating vital information to enable effective governance. My core responsibilities center on transparency, accuracy and building productive working relationships with both management and the board.

I gather the latest financial data and work closely with the accounting team to ensure we capture a precise picture of the company’s current position. I align with the CEO and other senior leaders, verifying that our numbers accurately reflect business operations and strategies. Collaboration is key – I touch base with legal, HR, investors relations – any area that interfaces with the finances.

My goal is to eliminate surprises and information gaps by addressing tough questions head on. What assumptions were made in projections? Where do we have exposure? What keeps me up at night? I stress test models for worst-case scenarios. This analysis arms the board with the complete data they need for fiduciary oversight.

I strive to be seen as a trusted advisor who speaks truth without spin. That means having informed opinions, surfacing potential red flags, and providing realistic assessment of current performance. My role is not to cheer from the sidelines but rather to equip the board with the unvarnished facts required for governance.

Still, facts alone don’t tell the whole story. Communication matters. I frame the narrative so trends and metrics are digestible and meaningful for the board. I anticipate where more context is needed, provide insightful explanation around numbers and welcome hard questions.

At times the board may challenge my recommendations or debate proposed growth targets. Yet open dialogue moves us forward, forging shared understanding of opportunities and risks. Over time, candid exchanges cement productive working relationships and mutual respect.

Preparing for quarterly board meetings is a cornerstone of my role as CFO. I serve the company best when I ground oversight in accurate financials, framed with context and insight. My goal is not to report data but to illuminate what the data means. This builds trust in management as a capable, ethical team while equipping the board to govern well. If I do my job right, sound decisions follow.

Strategies for building a strong relationship with the board

Building a strong relationship with the board is crucial for CFOs. Core responsibilities of the CFO in this context include ensuring transparency in reporting, highlighting relevant metrics, and building productive working relationships with the board.

When assembling the financial statements for an upcoming board meeting, the CFO must gather the most recent data and verify its integrity alongside the accounting department. It is essential that the CFO align with the CEO and management team to validate that the numbers accurately reflect current operations, projections, and strategic objectives.

The CFO must contextualize raw financial data for the board by highlighting metrics most relevant for governance and oversight, such as revenue growth trends, profitability margins, cash flow, liability exposures, and risk factors. Concise communication of key data points and trends aids the board’s understanding of the company’s financial position.

During board meetings, the CFO must provide expert perspective on financial reports, clarify complex issues, and openly address tough questions. While dissent can prove constructive by challenging assumptions, the CFO bears responsibility for defending projections, models, and recommendations.

Post-meeting follow-up demonstrates responsiveness in addressing the board’s outstanding information requests or concerns. Alongside factual transparency and accuracy, establishing trust-based working relationships remains critical, requiring honesty, integrity and effective communication from the CFO.

The CFO role carries immense duty to translate complex financial data into actionable intelligence that grounds effective board governance and stewardship. Financial acumen must be matched by clarity in contextualizing trends so key indicators relevant for sound oversight are readily discerned from the numbers alone.

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