Introducing a New Approach to Narrative Reporting For a Real Competitive Advantage

CFOs and Finance teams are under growing pressure to deliver precise and insightful reports quickly. The reason? To support comprehensive financial management reporting and analysis for the board of directors, equity stakeholders, and functional leaders. This need is particularly critical for Narrative Reporting and the Office of Finance.

CFOs, with their broad perspective on corporate performance, are strategically tasked with delivering reliable insights into every facet of the business. They must balance this responsibility by driving automation, enhancing productivity, and mitigating risk.

An essential aspect of this role is crafting a compelling narrative that explains the story behind the numbers. While CFOs and finance teams are crucial in providing trustworthy results for quarterly financial reports, budget variances, and board packages, the responsibility of creating these rich, detailed narratives extends beyond them alone.

The narrative process demands collaboration among all business leaders. This involves not just comparing current results with plans and targets, but also contextualizing both positive and negative outcomes. These elements are crucial for effectively communicating the latest results to the board of directors, equity stakeholders, and functional leaders.

What is Narrative Reporting in Financial Accounting?

In simple terms, Narrative Reporting in financial accounting involves providing a comprehensive, qualitative explanation of an organization's financial performance and position beyond the quantitative data presented in financial statements. It includes detailed commentary and analysis on financial results, business strategies, risks, opportunities, and other non-financial information. This type of reporting helps stakeholders better understand the factors driving financial outcomes and the context in which the business operates.

Narrative reports often accompany traditional financial statements and can include management discussion and analysis (MD&A), annual reports, sustainability reports, and other forms of corporate communication. Narrative reporting enhances transparency and helps investors, regulators, and other stakeholders make more informed decisions by offering insights into the organization's strategic direction, market conditions, and future prospects.

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What Are the Benefits of Narrative Reporting?

Narrative Reporting enhances financial communication by adding context to the numbers, offering a clearer view of performance and strategy. Unlike traditional financial statements, it explains the story behind the figures, improving transparency, decision-making, and stakeholder engagement. This approach integrates qualitative insights with quantitative data, helping to align financial results with strategic goals and foster trust. Let’s look at the benefits:

1. Enhanced Understanding: Provides context and explanations that help stakeholders grasp the story behind financial numbers, offering deeper insights into company performance.

2. Improved Transparency: Offers a clearer view of financial results, strategies, and challenges, fostering greater trust and accountability with investors, regulators, and other stakeholders.

3. Better Decision-Making: Supplies critical qualitative information that complements quantitative data, aiding in more informed and strategic decision-making.

4. Increased Engagement: Makes financial reports more engaging and accessible by presenting information in a more relatable and comprehensible format.

5. Alignment with Strategy: Helps align financial performance with organizational goals and strategies, showing how well the company is executing its strategic plans.

6. Enhanced Communication: Facilitates clearer communication with the board of directors, equity stakeholders, and functional leaders by providing a comprehensive view of financial performance and operational context.

Example of Narrative Reporting

Imagine a company’s annual report that includes a narrative section detailing its financial performance and strategic initiatives.

In the Narrative Report, the CEO might start by summarizing the company’s overall performance for the year, highlighting significant achievements and challenges. For instance, the CEO could explain that despite a 10% increase in revenue, the company faced supply chain disruptions that impacted product availability. The report would then provide context, such as how global supply chain issues affected the industry and what steps the company is taking to mitigate these issues.

The narrative might also cover strategic initiatives, such as a new product launch or market expansion, and how these align with the company’s long-term goals. Additionally, the report would discuss future outlooks, including expected market trends and the company’s plans to address them.

By combining financial data with qualitative insights, the narrative helps stakeholders understand not just the numbers, but the story behind them and how the company is positioning itself for future success.

10 Key Steps to Effective Narrative Reporting

To create a Narrative Report that truly adds value, it's essential to follow a structured approach. The following 10 key steps outline how to craft a compelling narrative that communicates key messages clearly, provides valuable context, and engages your audience.

1. Define Objectives: Clearly identify the purpose of the Narrative Report and the key messages you want to convey to your audience.
2. Gather Relevant Data: Collect and analyze both quantitative and qualitative data to provide a comprehensive view of financial and operational performance.
3. Understand Your Audience: Tailor the narrative to the needs and interests of your audience, including stakeholders such as investors, board members, and regulatory bodies.
4. Outline Key Points: Structure the narrative by outlining the main points you need to cover, such as performance highlights, challenges, and strategic initiatives.
5. Provide Context: Explain the background and context behind the financial data, including market conditions, internal changes, and strategic decisions.
6. Highlight Key Insights: Focus on the most significant insights and trends that drive performance, and explain their implications for the business.
7. Ensure Clarity: Use clear and concise language to make the narrative easily understandable, avoiding jargon and overly technical terms.
8. Be Transparent: Address both successes and challenges openly, providing a balanced view of performance to build trust and credibility.
9. Review and Revise: Regularly review and revise the narrative to ensure accuracy, consistency, and alignment with organizational goals and strategies.
10. Incorporate Feedback: Seek feedback from stakeholders and incorporate their suggestions to improve the effectiveness and relevance of the Narrative Report.

Narrative Reporting: Moving Beyond the Numbers

At a recent OneStream event, moving beyond the numbers to telling the story behind the numbers, was the message from several of our customers and prospects. One Finance leader put it this way: The whole Finance profession has, for too long, focused primarily on just the numbers. While the numbers need to be accurate and trusted, the ability to look beyond just the numbers and into the why is becoming increasingly more important. How do we explain our performance and tell the story behind the numbers?

Finance is uniquely positioned to not only deliver trusted results but also facilitate the storytelling process to put numbers in context with current and future business performance. This process is Narrative Reporting, and it is a combination of people, process AND technology. So how do we unify and streamline this process in technology to help facilitate corporate storytelling?

The Narrative Reporting Challenge

Narrative Reporting is traditionally a time-consuming, complex and inefficient manual process. To tell the story behind the numbers, Finance must collect comments, assemble data and reports, and create narratives for reporting.

Yet current solutions and approaches for Narrative Reporting comprise the following:

• Multiple tools
• Duplication of data and metadata
• Cut-and-paste reports, data and comments
• Manual creation of narratives in documents, spreadsheets or separate solutions

This mix creates complexity in the assembly, review and approval of narratives and narrative reports. As a result, the process involves difficulties. How? Incorporating the collaboration needed across the business for the analysis and collecting insights from business leaders to pull together the story both become more difficult.

Ultimately, traditional approaches fall outside your CPM system (arguably your system of record for performance). Thus, Finance teams are challenged to execute the process to collect the narratives and facilitate the needed analysis. Those challenges introduce the risk of reporting errors, resulting in a lack of trust in the reports, data and narratives used for financial and management reporting.

What Are the Risks of Narrative Reporting?

Let’s take a closer look at the risks and challenges of Narrative Reporting:

1. Subjectivity: The qualitative nature of Narrative Reporting can introduce bias, making it challenging to maintain objectivity and consistency.

2. Complexity: Crafting comprehensive and clear narratives can be complex and time-consuming, requiring significant effort to ensure accuracy and relevance.

3. Consistency: Ensuring consistent reporting across different periods and departments can be difficult, potentially leading to discrepancies and confusion.

4. Overloading Information: Providing too much detail or complex explanations can overwhelm stakeholders, making it harder for them to extract key insights.

5. Resource Intensive: Developing high-quality narratives demands substantial resources, including skilled personnel and time, which may strain organizational capacity.

6. Risk of Misinterpretation: Without clear and precise language, narratives may be misinterpreted, leading to misunderstandings or incorrect conclusions about the company’s performance.

OneStream's New Approach to Narrative Reporting

To address the challenge, OneStream introduced a new approach to Narrative Reporting at our Connect London event on April 24, 2024. The new approach streamlines and centralizes Narrative Reporting. How? By uniquely unifying it with all consolidation, close, financial and operational planning to automate the narrative assembly, live analysis, review and reporting processes.

The approach ultimately eliminates reliance on the old approach. That means Finance no longer needs multiple solutions and tools. Nor is copying and moving data and metadata, rekeying and cutting/pasting necessary. Thus, the new approach simplifies the process and ensures context, confidence and auditability within the Narrative Reporting process.

Key Features of OneStream Narrative Reporting

The new approach uniquely unifies and streamlines financial narrative report creation, from narrative assembly to data analysis and narrative capture. As a result, Finance leaders can leverage live OneStream data to drive transparency, confidence and contextualization behind financial data. Key features of OneStream's new approach to Narrative Reporting include the following:

Centralize Everything

Centralize the creation of Narrative Books all in one place in OneStream, organizing all report content, live analysis and collaborative capture of narratives. Centralization ensures Finance and business leaders can analyze and communicate the story behind the corporate performance.

Live Analysis at Every Step

Contextually analyze live, validated OneStream data and report content rather than relying on static or copied data in many different solutions and tools. Live analysis streamlines the analysis, review and narrative capture process.

Collaborate and Approve with Confidence

Collaborate with comments, track changes, views of all activity, submission/approval processes and version management to reduce risk and reporting errors.

Automate Narrative Reporting Processes

Embed Narrative Reporting in the close, planning and other workflow processes with approvals to collect narratives during consolidation, close, and financial and operational planning process. This saves time, drives efficiency and collaboration, and ensures confidence in the Narrative Reporting process.

Leverage a Trusted and Familiar Interface

Leverage the same OneStream interface and trusted reporting content alongside the familiarity of Microsoft Office to capture narratives and create rich, formatted and collaborative Narrative Books. Intuitively combine rich text documents, text, Word documents, Excel sheets and PDF documents, all uniquely unified in one solution. Finance can thus easily capture narrative content and deliver formatted Narrative Books.

One of our OneStream public sector agencies previously used six different tools to build its 1,400-page budget to submit for annual budget appropriation. The agency now only uses OneStream to create all its budget books, including budget briefs, justifications and final budgets. With OneStream, the agency achieved the following:

• Streamline the budget and narrative process
• Standardize and automate the process with master templates and exhibits
• Shorten the budget change and narrative capture process from days to minutes

OneStream Narrative Reporting Availability

OneStream's new approach to Narrative Reporting is available today, was officially launched at our Connect London event on April 24th and highlighted at our annual Splash User Conference in Las Vegas on May 20th. Other new innovative capabilities and Solution Exchange solutions were also unveiled.

We encourage our customers, prospects and partners to visit our Website and check out our social media posts for more details on this new approach to Narrative Reporting.

Consolidate and Simplify Narrative Reporting With OneStream

Over 1,400 companies worldwide have transitioned to OneStream's Intelligent Finance Platform. Why? To integrate consolidation, closing, financial and operational planning, reporting, and analysis, thereby fostering confidence and trust in their results. Moreover, they aim to transcend numbers to narrate the story of corporate performance. To learn more, request a demo today!

Did you know OneStream also offers a weekly live demo webinar every Friday for 1 hour on a specific topic? Check out our resources library.

FAQs About Narrative Reporting

What is a Narrative Report?

A Narrative Report provides a detailed, qualitative explanation of an organization’s financial performance and strategic initiatives, complementing quantitative financial data.

What is Included in Narrative Reporting?

Narrative Reporting includes a qualitative analysis that complements financial statements by providing context and explanations for financial results. It usually covers key performance highlights, strategic objectives, market conditions, operational challenges, and future outlooks. This reporting offers insights into the company’s achievements, risks, and strategies, helping stakeholders understand the broader implications of financial data and the organization's overall performance.