It’s a typical day in the office. Piles of paperworks sit on your desk, meetings are scheduled and the demand to make quick business decisions are in. As a business leader, how can you ensure that your decisions are beneficial to your organisation?

The answer lies in the information you consume. Management reporting — a data-rich document containing in-depth information on specific business activities — should be one of your go-to sources when making crucial decisions.

In this article, we discuss what management reporting is and how it helps in boosting the growth of your business. 

what is management reporting

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What is management reporting and how does it differ from financial reporting?

Management reporting is a subset of financial reporting that provides essential business information to help you make smarter decisions. 

Rather than focusing on general information, it digs deeper into specific areas of your business. This means it does not only answer the ‘what’ questions that you can see on financial statements. Instead, management reports uncover the ‘why’ and the ‘how’ behind your business performance. 

 

Financial reporting: What are our key performance indicators (KPIs)?

(Shows only the actual figures of your business without providing supporting information about your KPIs.)

 

Management reporting: Why did our sales surge during the third quarter of the year?

(Aims to find the answers to why your business achieved such results and the appropriate action to take based on the findings.)

 

Financial reports are mandatory. They’re external documents that regulators such as the Australian Taxation Office (ATO) use to determine if you’re following all applicable financial standards (e.g., IFRS, GAAP). Banks and investors also consult these reports to see if you’re eligible for business funding, loans and lines of credit. 

On the other hand, management reports are optional. These documents contain proprietary information about your business, and must, therefore, be kept confidential. They’re for internal use only. In addition, management reports do not follow any reporting requirements other than the one you’ve agreed upon internally.

To sum it up, financial reports provide a general overview of your business’s historical performance. They’re made to satisfy legal requirements. Meanwhile, management reports show your historical data and projections while giving you insights into how you can improve your business going forward.

 

Read Also: What is Financial Reporting? Definition, Importance and Types

 

Benefits of management reporting: How does it boost business growth?

Backed with actionable insights, management reports can help you:

  • Give a clear and timely overview of your business’s financial performance
  • Monitor and understand the key performance indicators (KPIs) of specific departments
  • Provide a unified source of information for executives, managers and employees to improve communication
  • Track how much you earn from a product, service or client
  • Determine the best steps (action plan) to take in implementing key business changes
  • Set benchmarks and goals
  • Guide you in making crucial business decisions
  • Put a better price tag on your products or services
  • Hire the right people
  • Decide how you’ll spend your resources

To cut it short, management reports assist in shaping your business’s future — how to run its daily operations, plan for growth, address potential challenges and how all of these translate into commercial reality.

 

Management reporting examples

Management reports can vary from one organisation to another. Below are some of the commonly used reports that can help you run your business more efficiently. 

  • Financial reports
  • Forecast reports
  • Financial modelling reports
  • ‘What if’ scenario reports
  • Break-even analysis reports
  • Project reports
  • Internal audit reports
  • HR and personnel reports
  • Variance analysis reports
  • Status reports 
  • Board reports and packages 
  • Line of business (LoB) reports

 

What makes an effective management report?

Management reporting is only effective when you can:

  • Understand what it means for your business 
  • Make decisions out of them
  • Drive you into action

That means management reporting is all about accuracy, clarity, relevance and timeliness. Your reports, therefore, must be easy to read and should contain:

  • Clear objectives – Describe the purpose of the report and how it contributes to achieving your departmental and organisational goals.
  • Key performance indicators (KPIs) – KPIs evaluate your organisation’s performance, revealing if your strategies work or not. Make sure that the KPIs you set are relevant to their intended audience.
  • Well-structured content – Create the report with the end in mind — what do you want to achieve and how do you need your executives to act upon the information provided? From there, you can curate the data you need to present, choose the right visualizations, prepare your analysis and introduce your recommendations and next steps.
  • Correct and up-to-date information – Always review the accuracy of your reports to ensure your executives can make the right decisions. Otherwise, presenting invalid data can also result in flawed outcomes.
  • Data visualizations – Visualizations like charts, graphs and highlighted percentages make your reports easier to read even without going through all details. Thus, saving you time in the process.
  • Action plan – An effective management report should also outline your next steps and action items based on results.

 

Get actionable insights from data experts 

Creating management reports requires you to dig deeper into your financial statements, find the reason behind your figures and collaborate with other departments to make sense of your data. In other words, you need to spend enough time producing such reports. 

If you don’t have the time to do this, but would like to get actionable insights about your business performance, our accountants and CFOs at ABJ Solutions can help. We use the latest business intelligence tools to generate accurate and real-time reports. For more information about our services, contact us today.