How Does a CFO Deliver Bad News to a Board?

There is a well know saying:

Tell me today and it’s ‘OUR’ problem

Tell me tomorrow and it’s ‘YOUR’ problem

Tell me after that and ‘YOU’ are the problem

The ramifications of every event and decision in a business will, one way or another, end up in the financial statements.  New hires have a cost, lost contracts affect sales, and the list goes on.

The CFO presents the financial statements to the Board, so any deviation from plan is theirs to explain, and often this is bad news.

No-one likes surprises, least of all a Board of Directors.  So, what are the steps to be taken when there is bad news to be delivered?

There are 3 main categories of bad news:

(there are many others, but these fall directly within the CFO remit)

  1. Bad Results

A good CFO and a good CEO are on top of the numbers. They don’t have to wait until the financial statements have been completed for that month to know how the business is trending. Obviously, the full effect can only be known once that month has been ruled off.

What is the problem?  This is easy – forecast sales are not being achieved, expenses are blowing out etc.

What is the cause? In a lot of cases this can be harder to ascertain. I am involved in numerous start-ups which have no shortage of design wins and initial sales to large corporations. But repeat orders are hard to come by. In many cases the Company is finding it difficult to understand the reasoning.  Are the customers buying the product to copy the technology; is there an issue with the technology they are not telling us about; are they finding other technologies that are better, or have we simply overestimated the market?

Establish all the facts – try and anticipate all the questions.  Directors are going to ask a lot of questions – be prepared.

Missed forecasts – temporary solutions are very short-term fixes for the market.  Avoid these solutions if they are not sustainable. If there are no solutions, or even if the issue is a timing issue, tell the market. The market wants bad news quickly and most class actions arise from not giving the market the bad news when it is known. 

Vocus Limited was hit with a class action after providing guidance in 2017

The class action, claimed the company misled shareholders about the potential net profit after tax, earnings and synergies available without reasonable grounds. The group argued Vocus had breached its continuous disclosure requirements, including that the guidance would not be achieved, and said shareholders had suffered a loss as a result.

Vocus’ then CEO tried to plug the gap in earnings by, amongst other things, recognising one-off sales immediately, not over the term of the contract, which was not acceptable accounting treatment. 

Other companies have avoided class actions despite similar behaviour but haven’t avoided the downturn in results and share price. The market doesn’t like bad news and punishes severely for it.  The market keeps punishing companies who keep delivering bad news. Get all the bad news out as soon as possible!

Assuming the CEO is aware of everything and supports your course of action, call the Chair of Audit. Go through the issues and how this news is going to be delivered to the rest of the board. If you have a good chair of Audit, they will help you navigate the complexities of delivering this news.

Be honest. I like to tell people I’m honest, but not a fanatic. In this case be fanatically honest. Tell it as it is, without sugar coating anything. What is the issue; what is the impact; and who is involved in trying to rectify the issues.  And if it cannot be rectified, what are the ramifications?

Establish whose responsibly it is to deliver the bad news – CEO? CFO? Sales Director?

When to deliver the bad news?

The financial statements are prepared at month end and presented at the next board meeting. If the bad news is significant, it should not wait until that Board meeting.

2. CFO or other senior finance staff resignations

Sometimes bad news is not in the numbers, (not yet in any event) but rather resignation of key staff, such as resignation of the CFO. If the bad news is your impending resignation, there are a number of steps. Once you have made up your mind you are leaving, leave on good terms. I can’t stress how important this is. I once had a CFO quit on me, who in his last week told everyone, including me, to ‘shove everything’. I met with this CFO and asked him to quietly hand over his work and leave. I also told him something that seems self-evident but far too often not considered, namely that no-one knows what life holds and to leave on bad terms is never a good idea. There was no point in alienating everyone around him.  A few months later his new employer went into administration, and he came to see me in tears to beg for his job back. I always thought he was a good CFO but there wasn’t another person in the organisation who was prepared to work with him again.

Prepare a succession plan. If there is no-one in the organisation who can take over your role, prepare a job spec for your discussions with the CEO to help them find your successor.

3. Lost contracts, suppliers, etc… – Sales, expenses or the like.

Whilst the effect of this bad news may be in the ‘numbers’ there may be others who should present this to the Board: The CEO, the sales director etc . They may be better placed to give explanations and provide solutions or what measure they have put in place to stem the problem. 

But if at the end of the day the bad news is yours to deliver, try deliver it as soon as possible.

Involve as many members as possible of the management team to try and find solutions or mitigations. In most cases you didn’t create the issue, so finding a solution is everyone’s issue.

This will also show the board ‘team work’ and camaraderie and how the team are trying to resolve the issue.


Surprisingly, the Board may offer guidance and valuable advice, after all if you told them in a timely fashion, it is everyone’s (‘Our’) problem.


Jon Brett | Non-Executive Director, Corporate Travel (CTM) / Chair of  the Audit & Risk Committee

Jon is the author of the very successful podcast series “The Taking of Vocus”  which chronicles the extraordinary rise of Vocus, what went wrong with the M2 merger and concludes with the privatisation of Vocus. The podcast  can be found on this LinkedIn link: https://www.linkedin.com/in/jon-brett-95734732/