How to Build Shareholder Trust with Reliable Financial Reports

How to Build Shareholder Trust with Reliable Financial Reports

In an ideal world, financial reports should build shareholder trust by offering accurate data about the performance of the company. In reality, a company’s financial report can be more flimsy—involving estimates and judgment from leadership that’s far from the truth.

Valuations are a classic example of hole-filled financial reporting. History is riddled with companies that went public based on inflated valuations and false narratives. WeWork expected to offer shares to the public at a $47 billion valuation. But because of financial mismanagement revealed in the company’s S-1 registration, the valuation quickly dropped, and WeWork withdrew from the IPO. When instances like these happen, it’s no surprise that shareholders and investors have little confidence in financial statements.

If you want to build shareholder trust, start with the data. With accurate and transparent financial reports, you’re better positioned to convince shareholders about the company’s health. Let go of spreadsheets—error-prone, inefficient, and often hindering—and move toward technology that allows you and the shareholders to trust the numbers.

Create Detailed, Transparent Reports

Transparency is essential to building shareholder trust, and the Enron scandal clearly illustrates why. The company’s leadership used fake holdings and off-the-books accounting practices to deceive regulators. When these activities were exposed, Enron’s share prices dropped from $90.75 at its peak to $0.26 at bankruptcy, leaving shareholders with worthless stock.

Build shareholder trust by creating high-quality, detailed financial reports that inform decision-making.

Consider the informational needs of investors and shareholders when creating your financial statements and annual reports. Shareholders look for the balance sheet, income statement, cash flow, and financial ratios to compare the company’s financial performance to the previous year.

Go beyond the required level of detail in financial statements. Disclose mandatory information—such as any account changes, errors, asset retirements, and insurance contract changes—about the company’s fiscal position at present and in the future. Also mention noteworthy events and transactions that you’re not required to disclose that still have a significant financial impact on the business.

Structure your financial report information in a way that helps shareholder readers understand the business’s financial position and performance.

  • Include critical accounting policies in the notes with the relevant items.
  • Display important disclosures front and center in your reports.
  • Ensure pages and labels support easy cross-referencing, so users can navigate important information.

Planful offers a robust library of reporting formats and distribution options, so you’re able to produce a variety of interactive financial and management reports from one source of truth.

Our platform automatically creates presentation-quality financial reports and generates balance sheets, income statements, statements of cash flow, and other financial and statutory reports that are U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS)-compliant, so you can focus on what matters—telling your company’s financial story. Check out our resource, “Four Reports Every FP&A Team Should be Using,” to learn more about how you can make the most of your financial reports.

Ensure Data Accuracy Through Integration

Shareholders depend on financial reports that are not only informative but also reliable. To build shareholder trust, companies must consider factors that can lead to inaccurate data.

Company size is one factor. The more complex a business structure is, the harder it is to collect and consolidate information while maintaining the same reporting standards as the holding company. This complexity is usually reflected in the annual reports and financial statements. For example, a large conglomerate with multiple business lines will likely find it harder to maintain accuracy in its financial statements than a company solely specializing in one industry.

Human error also contributes to data inaccuracy—especially when multiple business units are involved. These errors are often due to manual entry in spreadsheets, but they can also be the result of each business entity using different tools and formatting for reporting.

When data tools aren’t integrated, it leads to data silos. There’s no easy way to verify the information, and it often results in data inconsistency and errors.

How can you build shareholder trust and ensure data accuracy when reporting for a complex business? Centralize your data by moving from Excel-based planning to a Continuous Planning platform like Planful.

Planful supports collaboration and data integration across the business, so you can be confident in your numbers and view the data from a single source of truth. Our platform is also highly suitable for businesses with complex activities. It reduces errors by automating data collection, aggregation, and reporting.

Even with integrations, it still helps to talk with team members about properly handling the data that will be fed into your FP&A platform. Maintain accuracy by identifying which stakeholders are responsible for controlling the data from different sources. Agree on timelines for preparing data, so information is available in advance, and there’s enough time for close and consolidation. Planful allows you to tag collaborators within the platform, so you can communicate and collaborate asynchronously.

The manufacturer Thule Vehicle Accessories North America used to rely on Excel for budgeting and planning, which involved manually inputting data from multiple sources. This process was time-consuming and often produced errors. Since implementing Planful, Thule immediately saw improvement.

“Now we have one set of data and one view of life,” says Mark Cohen, VP of finance at Thule. “Budget meetings are now about the business, not about the integrity of information.”

Build Shareholder Trust by Providing Current Insights in Minutes

Your financial statements should be designed to build shareholder trust, which means speeding up your reporting process and reducing cycle times. Your financial reports and forecasts should quickly engage shareholders and investors, and manual, Excel-based processes aren’t set up to do that.

With Planful, you can save hours of your finance team’s time each cycle and provide accurate forecasting for your shareholders in minutes.

Related Posts

All Posts
Best Capital Allocation Practices for CFOs in 2021

As a CFO, your mind is constantly on finances: Where’s the money coming from? How’s cash flowing through the business? And, of course, what are the best ways to allocate your company’s capital? If that’s where your head is at, it’s in the right place. As CFA Ryan Barnes puts it, “Capital allocation decisions are ....

Read More
All Posts
Much-Needed Principles of Risk Management for a Changing World

Traditionally, finance teams have always worked on-premises, either due to security risks or limited access to data. But that was in a world before COVID-19. Now, the future of finance is looking remote—61% of financial services CFOs say “they plan to make remote work permanent for roles that allow it.” As your finance teams look ....

Read More
All Posts
Planful Perform 2021: Day 2 Brings More Keynotes, Customer Stories, and Tips to Accelerate Now

The final day of Planful Perform 2021 featured marquee keynotes, valuable learning sessions, customer stories, and more. Overall, this event for finance and accounting professionals featured nearly 20 hours of great content. Planful customers also shared success stories, with over 30 total speakers hailing from more than 20 Planful customers, partners, and friends. Here are ....

Read More