In a prior blog posting, we talked about the benefits of having a financial flash.  A flash is a snapshot of your estimated financials for the past month, ideally done by the first day of the following month.  A flash allows you to see how you did and let’s you take action well before the final financials are finished.

            
 

Two keys to creating the financial flash are:

• Setting up a process to export your financial information, such as into Excel, and setting up the estimates to create the financial flash.
• Knowing what the key items are that drive your financials and being able to estimate them within reason for the flash.

 Process

The more you can automate the process, the better.  A typical structure I set for clients includes:

 

• The downloaded financial statements from their financial reporting program, ranging from QuickBooks to enterprise wide systems.
• An adjustments section that can have a similar layout to the certain financial statements- balance sheet, income statement and operating expense schedules.
• The flash financial statements that combine the above two sections.  Even better is when these have a comparison against budget, which helps out the estimating process.  Your person doing the flash can use this as a guide- where there are large variances he can ask if this variance makes sense.
   

Key Items

The second major part is the knowledge of key items that drive your financial results and having a way to estimate these numbers for the financial flash.  Usually it comes to down to just a handful out of all the items that are reported on the financial statements.

 

At a pharmaceutical firm where I was CFO, the two key items that drove the financials were the margins on the sales of our products and the spending on outside services for bioequivalence and related tests.  Other costs such as selling expenses and administrative costs either did not vary much from month to month or varied directly with sales.

 

I had put in good invoicing, cost accounting and inventory systems, so we knew our margins each day.  Having margins for the flash was not a challenge anymore.  To get a handle on the outside tests, I would keep in close touch with our key laboratories and with our head of technical affairs towards the end of the month to have a handle on what work was in process that might not have been billed to us yet.

 

So think what key items you can estimate at month end that aren’t already known and have a process to create the flash and you will be on your way to knowing, rather than wondering, how you did last month.