Key takeaways
- Each report has different readers and different decisions, so choose KPIs that match the reader.
- Bad news should reach investors and banks from us first, together with a remedial plan.
Chapter 21 Management reporting for executives
Management reporting differs from compliance reporting in that it must be usable for decisions and forward-looking. The handbook sets out the principles of a one-page dashboard that selects only the key KPIs. Executives should be able to grasp the position within seconds, using traffic-light signals, trends and comparisons against budget or the prior year. It covers financial results, cash, Presale, construction, returns, Covenants and the pipeline.
Price Variance = (actual price − budgeted price) × actual quantity
Volume Variance = (actual quantity − budgeted quantity) × budgeted price
The monthly close should be completed in about 5–7 working days so that it is ready for the review meeting. Variance analysis must answer four questions: what happened, why, what the impact is and what will be done next, together with the variance level that must be escalated. It is not simply a report of numbers.
A board pack should include a one- to two-page executive summary stating results against plan, achievements, problems, the 3–6 month outlook and the matters requiring a decision. Financial storytelling turns numbers into reasons by providing context, performance, drivers, the effect on strategy and a forward-looking view. For ad hoc analysis, start by asking clearly what decision management will make, then define the scope, data and answer. The CFO should standardise reports, reduce manual work and give priority to the forecast over recounting the past.
Chapter 22 Investor reporting and communication
Reporting to JV partners, PE funds, family offices and bondholders must be transparent, consistent and based on comparable standards. A quarterly report should cover the portfolio overview, financial results, project status, the market, risks, ESG and the outlook. The capital account statement is the key document: it shows opening capital, capital calls, distributions, profit share, closing balance and the remaining commitment.
TVPI = DPI + RVPI, where DPI = distributions ÷ invested capital and RVPI = residual value ÷ invested capital
The handbook separates gross IRR from net IRR after fees and carried interest, so that investors see the return they actually receive. DPI is the portion already received in cash, whereas RVPI still depends on valuation.
A capital call notice must state the amount, due date, purpose and remaining commitment. A distribution notice must classify the money as a return of capital, income or profit, together with the tax consequences. Management should keep the virtual data room clearly structured, control access rights and keep an access log.
In a crisis, communicate quickly, disclose the facts, take responsibility, have a remedial plan, report continuously and speak with one voice between the CEO and the CFO. Investors should hear the news from the company before learning it from other sources. This trust has a direct effect on capital calls and the next project.
Chapter 23 Bank reporting and Covenant compliance
Bank reporting is continuous work throughout the life of the loan. Regular reports cover construction progress, sales, a financial summary, the compliance certificate, audited financial statements, insurance and the budget. Event-driven reports must be sent when a drawdown is requested, or when there is a significant change, a breach of conditions or a change of control.
The compliance certificate is a document signed and certified by management, so it must show how the Covenants are calculated as defined in the agreement, attach supporting data, certify the non-financial conditions and state that no event of default has occurred. Errors in this document matter far beyond administration.
Each drawdown request should be planned backwards from the date the funds are needed, with the drawdown request letter, progress certificate, payment evidence, sales report and insurance all prepared in full. The bank may appoint an independent engineer to check progress and cost. The KPIs that the bank monitors especially closely are Presale in both units and value, absorption rate, cancellation rate, average price and the proportion of foreign buyers, which indicates both currency risk and transfer risk.
The annual facility review can end in anything from keeping the existing terms, through improved or tighter terms, to having to find a new source of funds. This chapter concludes that banks cooperate most with clients who tell the truth first, submit documents on time without needing to be chased, and maintain relationships at several levels. Giving advance notice when headroom starts to shrink is therefore a direct risk management tool.