How a portfolio review should handle changed KPI definitions and missing facts

1. Write one definition for each KPI and map every company to it

To apply the same definition across every portfolio company, keep one register the whole review reads from, with one entry per KPI. Each entry holds:

• the name and the formula, in words and as a calculation
• what the KPI includes and excludes (for annual recurring revenue, live contracts only, or signed contracts as well)
• the line or schedule in each company's management report that supplies the inputs
• a version number and the date that version takes effect
• the person who owns changes to the definition

Each portfolio company keeps their own label, and the register maps it to yours. One company's recurring revenue maps to firm ARR as reported. Another company's contracted ARR maps to firm ARR once you remove contracts that have yet to go live, using the contract schedule in their report. If a company's report lacks the inputs a mapping needs, record a named gap (step 4).

The common mistake is keeping definitions in slide footnotes and spreadsheet tabs, where each analyst ends up with a different copy.

2. Carry the reporting period with every figure

Record each KPI's period the moment you take the figure from the monthly management report:

• the period start and end dates
• the period type: month, quarter, year to date, or last twelve months
• the source document, the page, and the date your team received it
• the definition version the figure was reported on

Invest Europe's Investor Reporting Guidelines (2024) set out portfolio figures for the current period, the period since investment, and either year to date or last twelve months. Your investors read the period type, so it belongs in the record from the first extraction.

Monthly figures roll up to quarters in two ways: flow measures such as revenue and EBITDA sum across the three months, while balance measures such as cash and net debt take the quarter-end month. A stored period type also catches a year-to-date figure copied into a quarterly column. In a calendar-year company's September report, that figure covers January to September.

When a company restates an earlier month, keep both figures with two dates attached: the period the figure describes and the date your team recorded it. The review can then show what the September and October reports each said about July.

3. Version a definition when it changes, and compare like with like

When a KPI's definition changes between reporting periods, give the new version its own effective date and leave earlier figures on the version they were reported on. To compare the current quarter with prior periods without crossing versions, you have two routes:

• Restate the prior periods under the new definition. This works where earlier reports carry the inputs, and each restated figure gets its own proof.
• Rebuild the current period under the old definition. This works from the company's detail, typically a contract or customer schedule.

Where neither set of inputs exists, mark a break in the series and refuse any growth figure across it. Record who approved the new version and when, and add every definition change to the exceptions list in step 5.

Cambridge Associates' benchmarking framework applies the same discipline to fund returns, warning against comparing an internal rate of return with a time-weighted return across periods because the two come from different calculation methods.

4. Record a missing fact as a named gap

When a required fact is missing, leave the figure empty and record the gap with:

• the fact, for example net debt at 30 September
• the company and the period
• the source it was expected from, such as the balance sheet schedule of the September management report
• every figure that depends on it, such as the quarter's leverage ratio
• the person chasing it

Keep the gap visible, because a carried-forward figure without a label looks identical to a reported one in the pack. The gap closes when the fact arrives, or when a named person accepts a stated substitute and the pack labels it as one.

5. Route each threshold breach to a named person before sign-off

When a KPI breaches one of your firm's thresholds, hold the pack until a named person records a decision, and send that person:

• the figure with its proof: source page, period, and definition version
• the threshold rule and its version
• the same figure for prior periods on the same definition
• any gap or definition change touching the figure
• the person who signs off the pack and the date it is due

To make every exception visible before the investment professional signs off, put every open item on one exceptions list at the front of the pack: breaches, gaps, refused comparisons, and definition changes. The pack records who closed each item and how. Thresholds are your firm's own rules, so set the levels and the named reviewers in the register alongside the definitions. For the approval itself, see who signs off a figure.

6. Record every outcome with its reason

Every figure and claim in the review ends in one of four recorded outcomes:

• Fulfilled with proof. The figure carries its evidence (document, page, and period) and its definition version.
• Refused by a rule. The record names the rule and the rule's version.
• A named gap. The record says what is missing.
• Reserved for a human. The record names the person and the reason the call is theirs.

The record stays with the review, so next quarter's review starts from this quarter's decisions.

A worked example: one quarter at a made-up software company

Take Ardent Analytics, a software business that sends your firm a monthly management report. Every figure below is invented to show the handling.

• ARR and the change of basis. Ardent's ARR at 30 June was €18.0 million on the firm's definition, version 1, which counts live contracts. In July, Ardent started counting signed contracts that had yet to go live, and their September report shows ARR of €21.5 million on that new basis. The contract schedule on page 9 lets the review compute live-only ARR of €19.1 million.
• The missing fact. The September report omits net debt.
• The threshold breach. The firm's rule sends any month of gross revenue churn above 2.0% to the deal team's operating partner, and Ardent's August churn was 2.6%.

The pack reaches the investment professional with four items on the exceptions list: Ardent's July change to their ARR basis, the refused 19% growth claim, the net debt gap, and the churn breach. The 6.1% growth on version 1 sits beside the refused claim as the comparable figure.

How to tell the review is working

At sign-off, count four things:

• figures without a stored period and definition version
• period comparisons that cross a definition version
• gaps open at sign-off
• exceptions closed without a named person

The first, second, and fourth counts should be zero, and every open gap should have an owner.

Where Saphenia fits

Saphenia carries out these steps as decision logic for portfolio company reviews, so an agent assembling the review follows the firm's definitions, periods, and thresholds.

Saphenia reads your management reports and the systems behind them, then structures the rules the review follows: what each KPI means, which source supplies it, and where the thresholds sit. Every fact carries the period in which it was valid, so a review can be reconstructed on the basis that held at the time. Every rule is versioned, and each proof carries the facts, the rule, its version, and the date.

Saphenia checks every claim in the agent's output against those rules before the review goes out. Hard rules, such as keeping ARR comparisons within one definition version, pass or fail outright. Soft preferences apply by default, and the record notes each override. Each claim lands in one of the four outcomes from step 6. A refusal names the rule the claim broke. When an operating partner approves a correction to a mapping, that correction becomes a rule the next review follows.

The definitions, mappings, and decision history are your firm's own record, kept in the environment you choose. You take it with you if you leave. Saphenia builds the decision logic in days, and the first decision ships in weeks. For the wider picture, see what Saphenia does, preparing a portfolio review, and evaluating a pilot.