Waiting for long for weekly or monthly financial reports to assess business performance is no longer in the game. Finance leaders want to make decisions almost instantly.
However, businesses still traditionally report financial statements and share static PDFs within small teams. Static reports capture the business health only at the time of creation. They don’t help us to drill further and see the data behind the numbers.
In this blog post, we will explore:
- The hurdles CFOs face with financial reporting
- The differences between static and dynamic financial reporting
- Static or dynamic financial reporting: What do you need and when?
- Final verdict
Let’s begin.
The hurdles CFOs face with financial reporting
Consider the first case where an old version of the report gets into the hands of the CFO. This can result in CFOs making analyses based on incomplete data, leading to negative consequences for the business.
Also, consider the second case in which more than in-built reporting tools are needed, and you start dumping data into spreadsheets from EPMs and other sources. You also have a couple of non-financial data in Excel. Then, you convert these spreadsheets into slides and PDFs, distributing them via email. Very soon, you end up with multiple versions of the dataset.
Some common barriers to financial reporting include:
Poor data quality
Data issues and error-prone tools (Excel) that introduce business risk.
Long closing process
Inefficient, labor-intensive reporting process with delayed delivery and high cost.
Static data
Unsecure static tables without instant access and the ability to drill into detail.
Missing context
There isn't enough context behind the numbers due to the lack of comments and overwhelming data.
The above challenges result in difficulty in measuring business performance and sub-optimal decision-making. But, with reporting software like Bluecopa, you get out-of-the-box connectivity and securely transfer the digital dataset onto the screens of CFOs. Some advantages include:
- Everyone works on the same dataset, eliminating multiple versions.
- You get better reporting.
- Finance team members stop creating multiple spreadsheets and focus on analysis.
- Utilize rich and modern digital delivery, and CFOs get up and running fast.
The differences between static and dynamic financial reporting
Static financial reporting offers a historical perspective on financial performance through fixed reports, while dynamic financial reporting provides real-time or near-real-time data through interactive, customizable tools, facilitating more agile decision-making and analysis. Below, we discuss some key differences between these approaches.
Nature of data
- Static financial reporting: Static reporting typically involves presenting historical financial data in a fixed format, such as traditional financial statements (e.g., income statement, balance sheet, cash flow statement). The data remains unchanged once it's generated, and users rely on these fixed reports to analyze past performance.
- Dynamic financial reporting: Dynamic reporting, on the other hand, involves real-time or near-real-time data. It provides continuously updated financial information, often through dashboards or interactive tools. Users can access current data and make decisions based on the most recent information available.
Time frame
- Static financial reporting: Static reports are usually generated at regular intervals, such as monthly, quarterly, or annually. They offer a snapshot of the organization's financial performance over a specific period.
- Dynamic financial reporting: Dynamic reporting offers a more current view of financial data, with updates occurring as frequently as needed. This allows for quicker decision-making and monitoring of financial performance.
Interactivity
- Static financial reporting: Static reports are typically static documents like PDFs or printed documents. They are not interactive, making it challenging for users to explore data or perform ad-hoc analysis.
- Dynamic financial reporting: Dynamic reports often come in the form of interactive dashboards or web-based tools. Users can customize the view, drill down into specific details, and conduct on-the-fly analyses, which enhances their ability to extract meaningful insights.
Decision-making
- Static financial reporting: Static reports are more suitable for historical analysis, compliance reporting, and long-term planning since they provide a historical perspective on financial performance.
- Dynamic financial reporting: Dynamic reporting is better suited for real-time decision-making, monitoring key performance indicators (KPIs), and responding quickly to changing market conditions or financial trends.
Technology
- Static financial reporting: Static reporting relies on traditional accounting software and reporting tools that generate fixed reports. These reports are often generated and distributed manually.
- Dynamic financial reporting: Dynamic reporting leverages advanced data analytics, business intelligence (BI) tools, and data visualization platforms. These technologies enable real-time data integration and visualization.
Accessibility
- Static financial reporting: Static reports are typically shared via email or printed copies, which may lead to delays in information distribution.
- Dynamic financial reporting: Dynamic reports are often accessible through web-based portals or mobile apps, allowing authorized users to access the information they need from anywhere at any time.
Static or dynamic financial reporting: What do you need and when?
The choice between static and dynamic financial reporting depends on your organization's specific needs, objectives, and the context in which you are using the financial reports. Here's a breakdown of when you might need each type:
When does static financial reporting work?
Historical analysis: Static reports are valuable when you need to analyze past financial performance, trends, and historical data. They provide a fixed snapshot of financial information for a specific period.
Compliance reporting: For regulatory or compliance purposes, static reports are often required. Organizations must submit audited financial statements and other compliance-related documents periodically, and these documents are typically static.
Long-term planning: When developing long-term strategic plans or forecasts, static financial reports can serve as a baseline. They help in understanding historical performance and projecting future financial outcomes.
External stakeholder communication: When communicating financial information to external stakeholders, such as investors, creditors, or regulatory bodies, static reports are the norm. These stakeholders often require standardized, audited financial statements.
Benchmarking: Static reports are useful for benchmarking against industry standards or historical performance. They provide a stable reference point for comparisons.
When does dynamic financial reporting work?
Real-time decision-making: Dynamic reporting is essential when quick decisions need to be made based on the most up-to-date financial data. It allows for real-time monitoring of key performance indicators (KPIs).
Operational control: Organizations that require fine-grained control over their finances, such as monitoring cash flow or inventory levels, benefit from dynamic reporting.
Adaptive planning: In rapidly changing environments or industries, dynamic reporting enables organizations to adapt and adjust their financial strategies quickly based on current conditions.
Interactive analysis: When users need to interact with the data, drill down into details, or create custom views, dynamic reporting, often in the form of dashboards and data visualization tools, is the preferred choice.
Continuous monitoring: Dynamic reporting is ideal for continuous monitoring of financial health. It helps identify issues and opportunities as they arise rather than waiting for a periodic report.
Internal management and collaboration: Dynamic reports are useful for internal management purposes and for fostering collaboration within teams. They provide a shared, real-time view of financial performance.
Final verdict
In conclusion, there is no one-size-fits-all answer to the static vs. dynamic financial reporting question. Instead, the answer lies in understanding when each approach is most beneficial.
By strategically incorporating both static and dynamic reporting into your financial toolkit, you can strike the right balance, ensuring that your organization is well-equipped to thrive in an ever-changing financial landscape.
Whether you're delving into historical trends or making real-time decisions, having the right reporting tool like Bluecopa at your disposal will be the key to financial success in the years ahead. Request a demo today.
