Do You Understand Your Company’s Big Picture?

Do You Understand Your Company’s Big Picture?

By Jennifer Briggs, President & CEO, Indiana CPA Society

And by Jenny Norris, Vice President Finance; Indiana CPA Society

Every business needs short term and long-term plans and to have a solid understanding of their big picture – the financials, but also future prospects. Finance professionals, including CPAs, can give you the information and planning help you need to make decisions about your company. You may be familiar with the traditional forms of business reporting for regulatory requirements, but a new type of reporting is becoming more prevalent and could be an outstanding opportunity to learn more about your own company: Integrated Reporting.

An Integrated Report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium, and long term. What does that mean exactly? Think of an Integrated Report as an annual report on steroids. An annual report is a great recap of an organization’s past year, usually presenting operating and financial highlights and some pretty charts and graphs. An Integrated Report is all that and more, with a focus on the future outlook. It addresses an organization’s governance, strategy, business model, risks and opportunities. The whole report is built around the story of how your company creates value for its customers and other stakeholders.

There is a framework developed by the International Integrated Reporting Council (IIRC) available at www.integratedreporting.org. Working with your CPA, your finance department, and really your whole leadership team you can eliminate silos of knowledge and create a comprehensive view of your company. You could, and should, even include various stakeholders outside of our employees and leadership to find out what matters to them most.

Admittedly, Integrated Reporting is only slowly growing in the U.S. but its prevalent in Europe, India and Indonesia. In fact, if you do business overseas you may be asked to provide one to a vendor or prospective partner. Users of financial and business reporting are demanding more and more transparency and accountability from companies – and if you’re trying to grow your business or get future investment – this kind of comprehensive description can be very important.

Elements of an Integrated Report include various capitals:

  • Financial Capital – including both available and obtained funds
  • Manufactured capital – physical objects available to an organization for use in the production of goods or the provision of services
  • Intellectual capital – organizational, knowledge-based intangibles (including intellectual property; “organizational capital” such as tacit knowledge, systems, procedures and protocols; intangibles associated with the brand and reputation that an organization has developed)
  • Human capital – people’s competencies, capabilities and experience and their motivation to innovate
  • Social and relationship capital – The institutions and relationships within and between communities, groups of stakeholders and other networks and the ability to share information to enhance individual and collective wellbeing
  • Natural capital – All renewable and nonrenewable environmental resources and processes that provide goods or services that support the past, current or future prosperity of an organization

An Integrated Report also includes eight content elements that are fundamentally linked to each other and are not mutually exclusive including business model, risk and opportunities, performance, outlook and strategy, and resource allocation. At the Indiana CPA Society we provide resources to CPAs to allow them to provide this level of reporting to clients.

Are you thinking, this is great for not-for-profits but this doesn’t make sense for my company? Why would I share my capitals and strategy with the world? You don’t have to! But, it is very useful to share with important stakeholders, including a board of directors, potential investors and financial institutions.

And we have walked the talk. The Society released its fourth Integrated Report earlier this year. Operationally, it is a great tool to ensure we are doing what we think we are doing. You can see our Integrated Report on our website here: www.incpas.org/integratedreport. To learn more about Integrated Reporting talk with your CPA, your internal team, or contact the Indiana CPA Society for more details.

Category Features, Last Word