All businesses, no matter their size need effective reporting systems.
Small business, in particular often underestimates both the need and importance of establishing management reporting systems.
The advent of sophisticated accounting software has created an environment that collects significant amounts of data in real time that can be accessed and customised to produce many different reports from simple Profit and Loss to customised reports specific to the entities needs.
Once established the reporting system forms part of the control system that provides valuable information to management allowing them to make decisions based on sound data for the benefit of the organisation, its staff and customers.
Many of our customers question the need for such systems. The answer to this question is multi-faceted but is essentially the need for capturing data from areas such as, financial, employee, client, accounts, products, assets, investment performance and many others to assist in the decision-making process.
There are a number of reasons why an enterprise requires a sophisticated reporting system, such as:
- Using strategic metrics to assess and monitor the performance: Where the principal strategic direction is to grow the business, the implementation of ways to measure performance against competitors – and also against their own performance.
- Understanding your position: effective management reports provide detailed metrics that produce a snapshot of the business’ health and evolution. This allows management to compare it to competitors in order to the underlying strategy is sound or may need
- Using performance benchmarks: historical data allows for the creation of benchmarks to measure both operational and financial performance. These also provide a forum for setting best practice benchmarks while also avoiding poor ones.
- Improved communication: Sophisticated reporting systems provide for effective communication between managers, customers, colleagues and external parties such as banks and investors. These reports help raise the visibility and transparency of various activities across departments thus improving inter-company communication.
- Improved collaboration: with improved inter-company communication, interdepartmental collaboration can be greatly improved ensuring a more cohesive working environment. This also assists in the setting of common goals which are clearly understood and supported by all staff. Management reports are also critical in establishing a collaborative working environment on specific projects or initiatives.
- Staff engagement & motivation: a sound and sophisticated management reporting system provides for accessibility to critical or important data to all staff. This also assists in improving individual and or group performance. It is a historical fact that when staff are engaged and recognised for their efforts work performance and or productivity is greatly improved.
- The need for continual improvement: The Japanese have a single word for this “Kaizen” which is also the underlying philosophy of many Japanese companies such as Toyota. All companies should adopt such a philosophy which can be underpinned by sound management reporting systems which will provide for sound decision making based on hard facts which will, in turn, foster continuous improvement. If you are not continuously improving and evolving you will wither on the vine and die.
Having some of the reasons for establishing a Management Reporting System we can then look at what should be included in such reports.
Set out below are a number of examples of management reports:-
Key Strategies, Goals and Objectives
When compiling any report it is essential that the end result is the key driver in developing the report.
It is important that you set clear and unambiguous key performance indicators in your report. In normal circumstance, you should have a least two or three goals in mind when developing a report.
This issue is entirely dependant on your audience. For example, senior management will have a different set of KPIs in mind as opposed to a junior salesman.
In order to set the right KPIs, it is beneficial to contemplate what the recipient would ask for in such a report. Once you have established the recipient’s expectations the creation of the report becomes a much simpler task.
The Data Tells a Story
Presenting data in the right context is also critical as your audience will be persuaded with differing information.
In essence, you need to tell a story with your data.
When compiling the report you need different forms of data such as historical showing patterns or trends from the beginning, middle to end, contrasting data such as actual results versus budgeted outcomes and lastly, the use of visual display such as graphs is equally important.
In support of the above clear and precise text is also critical in establishing easy to understand context that discusses the pertinent data peculiar to the outcome of the report.
Use Digital Technology
The use of paper-based reports in today’s business environment is becoming rarer and rarer as a soft copy or digital reports have become the accepted best practice for the production and distribution of reports.
Digital technology also allows for enabling drilling down to other supporting data through the use of digital links.
By understanding that your organisation has a significant and important volume of data available that can be harnessed for the greater good of the organisation through the production of meaningful reporting systems you will add significant value to your business.