Consistent and properly organised management reports help keep a business on track. Collecting and analysing data provides a crucial insight into the state of projects, departments, resourcing, staffing and finances, and allows senior management executives to make informed decisions about the future of their company, and increase performance and profitability.
This article outlines what should go into a management report to ensure that your business gets the most out of it.
Is a Management Report the Same as a Financial Report?
Before getting into the nitty-gritty of management reporting, it’s important to point out the differences between a management report and a financial report. Whilst management reporting is optional, financial reporting is required by law, with the information generated being supplied to HMRC and Companies House. This information is also required by investors and banks when deciding whether to invest or lend to a business.
Management reporting is not mandatory, but plays an important role in strategic decision making. It allows executive management, governance bodies and other senior figures to control and direct a business with more skill and efficiency. Knowledge is power, to coin a phrase, and a well put together management report gives you the information necessary to successfully drive your organisation forward.
How Often Should Management Reports Be Prepared?
The key part of making management reporting useful for your business is that they are prepared on a regular basis. By consistently monitoring what is happening in a business, it is possible to pinpoint what is working and what isn’t, and make decisions accordingly. There is no fixed rule for when a report should be prepared, but it is usually on a monthly basis. Some companies may choose to prepare them weekly or quarterly, but may find that these reports are too close together or far apart to be genuinely useful.
Monthly reporting allows enough time for the data that is gathered to reveal what is happening within a business, but does not allow enough time to elapse for any problems to get out of control. By getting the frequency of reporting correct, a genuinely insightful picture of the business can be built up and carefully monitored.
What Should a Management Report Include?
A bespoke comprehensive management report will use and interpret data to understand the financial health of your business. There is no definite format for a management report, unlike end-of-year accounts, instead it’s a case of choosing a package of reports that are most valuable to your business. However, a typical management report should include these reports, with an option to add more if necessary:
- Executive Summary. The executive summary provides an overview of the main points of the whole report. It should summarise the main points and be able to give the reader a quick understanding of how different areas of the business are performing.
- KPIs. A KPI (Key Performance Indicator) is a measurable value that shows how effectively a company is achieving a key business objective. All businesses have different KPIs depending on the sector they operate in and the goals of the company. To be useful in reporting, a KPI should be straightforward and easy to measure, for example, ‘How many customers did we add this month?’
- Cash Summary. A cash summary shows the movement of cash in and out of your company during the period of the report. Cash flow is essential for a thriving business and a cash summary helps to forecast when it is likely to come in and go out. This allows executives to make decisions and plan accordingly.
- Profit and Loss Report. This is a financial statement that summarises the revenues and expenses incurred during the period of the report. One of the main takeaways of this part of the report will be your business’ ability to generate a profit by increasing revenue or decreasing costs.
- Balance Sheet. The balance sheet shows the previous period’s financial position and indicates whether the company has enough assets to pay any current debts. It also shows liabilities and equity at the same particular point in time. The balance sheet is one of the most important statements used to highlight the financial health of a business.
A brief glance at your company’s bank account now and then is definitely not enough to assess the health of your finances. If you want your company to succeed and grow, a regular review of your management reports is essential. The reports will help you gain a true understanding of how your business is performing, and from this point allow executives to make informed decisions about the direction to steer it.
Management reports are an efficient way to keep abreast of what is happening with your company, freeing up time for you and your colleagues to implement their important findings.