What is Outcome-based Reporting?

The CFO sits in a perfect spot to connect data from all corners of the organization and identify insights that bring strategic value. And yet, CFOs have been fighting for years to earn legitimacy as strategic partners. What’s the key to earning that seat at the table??

As the CFO, embracing outcome-based reporting is a tangible way to deliver value to the C-suite. Outcome-based reporting enables real-time budgeting and planning to achieve more agile planning processes that help your organization make profitable decisions.

What is Outcome-Based Reporting?

If you’re looking to drive business results beyond budget keeping, you need to think of the outcomes your business wants (e.g. higher sales, increased gross profit, successful new product line launched), and start measuring and monitoring accordingly.?

An outcome-based approach to reporting departs from classic methods like budget comparisons, which rely heavily on annual planning processes that don’t keep pace with business change. Outcome-based reporting aligns the entire organization on operational metrics that matter most and helps finance surface strategic insights that can drive greater performance and growth. Budget management and comparisons of actuals to planned only addresses a small part of the strategic need. Outcome-based reporting focuses on desired results, not just numbers on a spreadsheet.

What’s in an Outcome-based report?

Where finance teams go wrong is when they build reports to answer anything and everything about the business. Effective reports focus on the three to five KPIs that matter most to your organization.?

1) Start with Cash Flow and Profitability

Reports should revolve around operational metrics that drive two things—cash flow and profitability. When you focus on metrics that directly impact cash flow and profitability, you’re putting yourself in a position to make data-driven decisions about planning and budgeting in an agile way.?

2) Understand how the business makes money

It’s not enough to understand how your business makes money on a high level, you need to have deep knowledge of the business model. That means maximizing visibility of all the data points across the customer and product journey. Don’t strive for perfection in your models. Concentrate on understanding what the business delivers to its customers, how it’s delivered, and who it is delivered to.

Revenue: Know how your business charges customers and what it charges them for. The accounting and revenue recognition data that comes with this process is critical for outcome-based reports, but those are the easy parts of understanding revenue for finance. More importantly, you need to understand what exactly you’re selling. Finance doesn’t need to be technical product experts, but without product understanding you can’t create reports that uncover strategic insights.

Expenses: The cost associated with the business model doesn’t just mean knowing your gross margins and net margins. It means understanding what exactly has to happen for your business to create and sell the product. Don’t get lost in granularity when trying to get a strong grasp on your expenses; the goal is to gather enough data to generate reasonably accurate plans and reports.

Focus on answering strategic business questions

When you put both sides of the financial impact equation together, finance becomes the hub between sales, marketing, and product. With that unique vantage point, you can translate all of sales, marketing, and product’s activity into revenue and expense terms and faciliate outcome-based conversations. These conversations enable finance to more accurately create forecasts and?puts finance on the path to becoming a true strategic partner in the business.

The following four principles make for effective outcome-based reporting.?

Have a “Good Enough” Mindset

For finance’s outcome-based planning, it’s more important to be directionally correct with your insights. Don’t waste time trying to be perfect.

Make Event-Based Decisions

Event-based decision-making means adapting your financial plan according to the outputs of outcome-based reports.?

Find the Right Level of Granularity and Timeliness of Data

Finance doesn’t need to track every business metric in real time, know when to get granular with data and when higher-level, lagging indicators will do the job.?

Prioritize Collaborative Relationships

Cross-functional buy-in and accountability critical for outcome-based reporting and real-time planning. Prioritize collaborative relationships to make finance feel more like a business partner. You need the data other department have to help them be more successful

This blog is an abridged version of a more comprehensive whitepaper Eventus created in partnership with Mosaic, a SaaS accounting and finance platform that delivers the ability to create outcome-based reports for the agile business. To get access to the whitepaper, click below.

To learn more about Mosaic visit www.mosiac.tech.