Managers need timely access to financial reporting in order to make informed business decisions and respond promptly to new developments. Unfortunately, preparing financial statements under U.S. Generally Accepted Accounting Principles (GAAP) usually takes several weeks, and many companies wait until the end of the quarter or year to produce GAAP financial statements. Simple “flash” reports are one tool managers can use to stay up to date in the meantime.
How flash reports are used
Flash reports aren’t prepared according to any official standard, but they’re usually a single page or less and can be prepared in less than an hour. Their intended purpose is to give managers a weekly snapshot of important financial figures such as cash balances, collections, payroll, and accounts receivable aging. Some metrics like sales, shipments, and deposits may even be tracked daily. Flash reports are especially useful during seasonal peaks and for recently restructured companies.
A useful flash report will be customized to the needs of the specific company. A law firm may have more reason to track billable hours, for example, while a manufacturer might track machine utilization rates instead.
Flash reports are designed to draw managers’ attention to the items that are most important to the company. A restaurant’s flash reports might break down revenues by day of the week or distinguish between sales for alcohol and food. Restaurateurs will also want to carefully track food and liquor costs, labor, and gross margins.
Limitations of flash reports
Companies can identify problematic trends or exceptions by using comparative flash reports. For instance, the numbers in the current report can be compared to the previous week, compared to budgeted amounts, or compared to the same week in a previous year.
Investors and lenders may ask for copies of a company’s flash reports when the company is first starting up, rapidly expanding, or struggling—particularly if the company hasn’t always met projections for growth and profitability in the past.
However, it’s vital for shareholders to understand that flash reports are designed for internal use only—while they provide a rough estimate of current performance, they are rarely 100% accurate. It’s common for cash to fluctuate throughout the month due to billing cycles, and adjustments are often made when preparing GAAP financials.
Contact us for assistance
If you’re relying on dated financial reporting, you might be surprised by unexpected threats or miss out on possible opportunities. Flash reports can help you make more informed decisions while waiting for your GAAP statements, as long as you’re aware of their limitations. If you need help implementing flash reporting that’s suited to the needs of your business, contact us.