Insider Business Club: enhanced business reporting

What exactly does the term enhanced business reporting mean?

Dr Robert Eccles, managing director Perception Partners

Enhanced business reporting is really about content. It’s information to enhance
the financial statements. It’s not intended to replace them. In today’s economy
with intangible assets and intellectual capital becoming increasingly important,
the hard assets, the things captured in the financial statements, income
statements and the balance sheet are an incomplete representation, both of a
company’s performance and its capabilities for continuing or improving it’s
performance.

That is where enhanced business reporting comes in. So it is contextual
information around strategy but it is also information on key performance
indicators and key value drivers. Issues around timing and format are important
but they are not what it is about.

The distinction is that when you say enhanced business reporting in the US
people will largely think of that as information for shareholders. In Europe and
Japan they would think of it as not only for shareholders but for other
stakeholders. The differences from corporate social responsibility reporting
tend to be somewhat more blurred.

Has it changed the way management accesses information?

Mark Holland, partner at Baker Tilly and ICAEW IT faculty

There are new ways available for management teams to look at information. Some
management teams still rely on the resounding thud each month when an inch worth
of paper appears on their desk and they plough their way through it, analysing
what is going on in the business.

Too often, clients and senior management say they receive this information
but that it doesn’t really tell them anything they don’t already know. I am
seeing some companies who are now saying let’s redefine the key performance
indicators. Let’s find other ways of analysing and understanding what’s going
on.

The technology is continuing to power ahead. XBRL has been around for a
while, but it is still not as widely used as perhaps we thought it might have
been. I look forward to the day though when business managers will look at
information in this way. Technology development in the last three years has
enabled businesses to do this.

If one can then hook in additional competitor reporting, these become hugely
valuable tools that, in my view at least, senior management should be adopting
as a matter of some urgency.

Is there a risk of providing competitors with sensitive commercial
information?

James Fisher, product marketing director at Cartesis

The argument around the risks of releasing sensitive information to competitors
when engaging in enhanced business reporting is worthy of discussion. That said,
I do think that a lot of information is available in the market.

There are two points to be made. First, by making this information available
you are able to use technologies like XBRL. Integrating those with performance
management solutions to collect a wide range of metrics which feed into the
process of understanding your business further, benchmarking your performance
compared to peers and understanding a better range of value drivers become
options.

The other argument that you often hear is that the potential here is that we
publish information that perhaps we are not completely satisfied with, that we
haven’t got a complete level of trust in.

Historically, financial consolidation applications have been very good at
providing confidence in those financial numbers and now performance management
applications are able to extend the confidence into non-financials as well. This
addresses both problems.

Is enhanced business reporting appropriate for small businesses?

Ben Tamblyn, channel development manager, Microsoft

I think enhanced business reporting is critical for a small business. If you
look at the example of what is happening at the moment, with regards to the
proliferation of Web 2.0, there are a number of start-up companies that are
beginning to emerge with an interesting, quite dynamic online business.

To a certain extent, they are not really governed in the same way that
traditional companies might be around this whole concept of financial reporting.
Instead, what they are looking for is just driving traffic and the concept of
building social networks.

This almost means that we have a new level of criteria, in terms of the way
in which we find the value of an organisation. Through that kind of traffic
metric, you are finding a number of organisations that are interesting and worth
investing in.

Utilising those kinds of measures as a metric for determining the length of
investment I think shows that the use of enhanced business reporting by small
companies is beginning to start to change.

Chaired by Nicholas Neveling

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