Introduction

Do you need a management report? If your answer is yes, then you are not alone. A lot of small businesses need management reports to measure their progress, identify areas of improvement, and make informed decisions. But, before you can generate a report, you need to know what to include in it. This article will provide you with the essential tips for creating effective and informative management reports for your small business.

Background

There are businesses that operate blindly and succeed, and there are a few others that mismanage resources and may fail due to their ignorance of what is going on in their business. If that first set of business owners took the time to understand their business, think how much more successful they could be. If the second set of business owners knew what was happening, they might have been able to save the business.

Management reporting provides business owners with a clear picture of their company’s success. Entrepreneurs can make rational decisions to improve their businesses by incorporating reporting into their processes.

Management reporting is an essential component of any business, regardless of industry or size. This data demonstrates how a business is performing, what is working, what is not, and what its strengths and weaknesses are.

This is beyond just financial information, but the comprehensive reports of the company can give a lot more context into why the financial numbers are the way they are.

Reports should always provide basic financial information, legal information, tax information, financial predictions (budgets and forecasts), and so on.

What is a management report?

A management report is a document that provides an overview of the organization’s financial performance, including key metrics and trends. The Management Report is a tool used by the management of small businesses to evaluate the overall quality and performance of their company. It does this by objectively examining everything from the business’s financial position to its customer experience.

Any information relevant to the business should be included in the Management Report. This is not limited to financial information; it can also include things like noteworthy events, changes in business operations, or changes in management. It can also include an analysis of the financial statements included in the report and how they relate to the performance of the business.

What should the Management report include?

In plain English? Anything. The Management report can include anything. This includes anything relevant for management to digest and use as a foundation for making sound business decisions.

However, as a best practice, the information in the Management Reports should be divided into two sections: financial reporting and non-financial reporting.

Financial reporting includes information about revenue, expenses, and cash flow generated or lost in the business, as well as non-cash accounting items like depreciation expense or amortization expense on intangible assets acquired through acquisitions.

The term “non-financial” refers to any other item that does not directly have to do with finances. Non-financial information is data that has nothing to do with money but helps you understand where your company stands. One type of non-financial information is customer data. This can include things like customer satisfaction surveys or customer loyalty programs. Another type of non-financial data is employee feedback. This can help you better understand what your employees need and how they feel to be more productive and engaged in the workplace.

In the management report of a small business, non-financial information is anything that sheds light on the current state of the company. This includes information about how employees are feeling, what clients think about the company, and what suppliers are saying. It covers what stakeholders are looking at.

The idea is to include any information you feel could help a reader understand how the company performed during the reporting period.

Difference between the Management Report and Financial Statements

The Management Report is an internal report of a company. It provides insight into how the company has performed and what it anticipates for the future. A Financial Statement, on the other hand, is a summary of a company’s financial situation.

Financial Statements are guided by Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), and legislation, whereas Management Reports can take any format appropriate for management use. However, for ease of use, adhering to the standards, legislation, and principles will lend credibility to the Management Report.

A Management Report will frequently include information about business strategy and upcoming developments, whereas a Financial Statement will not.

A Management Report is typically intended for internal stakeholders, whereas a Financial Statement is intended for anyone who may be impacted by the company’s financial situation.

As stated earlier, the level of non-financial information included in the management report is way more than that of the financial statements.

Things to know before starting the management report

Want to know how to get started on your management report? Here are the things you’ll need to know first:

1) What is the purpose of the report?

The first step to writing a good management report is understanding what it will be used for and how you are going to use it. If your goal is simply to see if everything’s running smoothly or whether there have been any problems, then you don’t need much more than an overall summary of the past year’s activities. However, if you want something with a little more meat on its bones, such as suggestions for improvement in areas such as customer service or marketing strategies, consider including details that show how well things are going now compared to how they were in the past.

2) Who is your audience?

A management report’s target audience is typically comprised of company executives, directors, and other decision-makers. Even though management reports are intended for internal consumption, they are not available to everyone in the company.

3) What will you include in it?

You need to engage with the users of the reports to determine what exactly they need to make the decisions that the business needs. While there is “standard” information in Management Reports, particularly financial information, it is critical to only include information that is relevant to the stakeholders.

4) How much detail do I need?

Some people like their reports to be as detailed as possible, with charts that show every sale made and the customer’s name. Others find that having a summary of the key points they want their clients or employees to know about what happened in the previous month/quarter/year is more useful. Make a profile of your audience and find out what their preferences are.

Benefits of having management reports

There are many benefits to having management reports, especially for small businesses:

1. They help you manage by exception and identify trends.

2. They give you the ability to make sound business decisions.

3. They allow you to plan and budget more effectively.

4. Help you make better decisions by looking at data from multiple sources at once.

5. Make sure everyone in the company is working toward the same goals.

6. Identify problems before they become too serious to fix.

7. Demonstrate how different departments are working together and contributing to the overall success of the company.

Frequency of Management Reporting

The frequency at which management reports are produced in a small business is directly dependent on the goals of the business. Some businesses need to analyze their numbers on a weekly basis, while others can get by with monthly or even quarterly reports. In a small business, the frequency of management reports should be driven by what you need to know to keep your company growing and thriving. This can be anywhere from monthly to daily.

In general, it is a clever idea to produce reports at least every month, but there are some exceptions. For example, if your business is seasonal, you may be able to get by with just producing quarterly reports during off-season months and weekly or biweekly reports during peak-season months. This will allow you to keep a close eye on your performance without overwhelming yourself with unnecessary paperwork.

In a small business, who oversees preparing the management report?

The management report is a great tool for any business to use, and it has the power to bring all your team members into the fold when it comes to understanding the current situation in your company. By keeping everyone updated on your progress on a regular basis, you can ensure that you are on track to meet your objectives. The question then becomes, “Who in a small business is responsible for preparing this management report?”

The answer may surprise you!

It is important to remember that no one person in an organization is responsible for everything. In fact, even in a large corporation with a dedicated staff of many different people, no one person could keep track of all the details. As a result, large corporations have such sophisticated organizational structures; there are numerous people who are responsible for various aspects of the process.

However, in a small business, it may be more difficult to separate duties because there aren’t enough people to do each task. This means that some tasks will end up being duplicated or even forgotten. However, if you’re prepared to take on the brunt of preparing the management report yourself, then you can make sure that every detail is covered, and nothing slips through the cracks.

As the custodian of financial information in a small business, the accountant (or CFO) is typically charged with preparing the management reports. The accountant should be influential and knowledgeable enough to get the non-financial information that gives context to the financial numbers. In some other establishments, the Chief Operations Officer is responsible for the management reports because of the operational nature of the reports. Nevertheless, they would need to collaborate with the finance and accounts team.

If there are slim capabilities within the business, it could be outsourced to a firm like myCFOng.

Finally, the business owner oversees establishing the structure for this management reporting in terms of personnel, software, and other resources needed. Management reports go very well with Performance Management.

Contents of typical management reports

Consider the following for your management reports:

Sales Report

This is a very crucial report for every business, and it is best compiled and viewed daily for quick decision making. A good sales report should be able to be analysed in a variety of ways. Sales by product, Customer, Salesperson, Location, Age Group, Cash Sales, Credit Sales, Daily Sales, Weekly Sales – the possibilities are limitless. Having this report helps management make quick and targeted decisions to improve or stabilize sales.

Cash Report

You’ve heard the expression “Cash is King,” so tracking cash flows (inflows and outflows) is a critical part of running a business. A few business owners are usually carried away by “credit alerts” and bank balances and fail to monitor how cash is leaving the company. A healthy bank balance today can be depleted significantly tomorrow without proper tracking. At the very minimum, all cash must be reconciled daily. With the introduction of online banking, reconciliations can now be performed in real time.

Expense Report

Keeping track of every cost that leaves a business is just as important as monitoring sales and the revenue coming in. To stay above water, you should try to keep your monthly burn-rate as low as possible while constantly looking for ways to cut costs. It is important to establish a monthly expense budget and do everything you can to stay at or below that number. It is easy to let the expenses pile up, so make it a habit to run a report weekly and cross-check them against your budget. Increased expenses are not always a dreadful thing—a surge in growth can cause expenses to rise, so make sure to adjust your budget goals accordingly.

Income Statement

The income statement gives a simple view of what is happening in a business at any given time. It tells you if a company is making a profit or a loss and helps make decisions based on that outcome. It can also be used to tell whether a profit or loss will be made at the end of a period.

Balance Sheet

The balance sheet shows what a company owns (assets) and what it owes (liabilities). The distinction is what is known as Net Assets or Net Worth. Running this report frequently enables management to take important decisions regarding a business. For example, if a small business with a low net worth has N10m in debt (liabilities), management may make the logical decision not to incur additional debt to increase assets.

The list of reports is not exhaustive as there are so many aspects of a business that need to be analysed and adjusted to achieve growth and sustainability. Hence, owners and founders are expected to know and generate reports that are beneficial to them. The goal is to use data obtained from reporting to your advantage, allowing you to make sound business decisions.

Conclusion

Call it whatever you want: control, communication, feedback, and so on. Most small business owners are aware of the importance of keeping management reports to monitor their business. Yet many are making basic mistakes that can be avoided with a little careful consideration. While there is no need for complex financial reports or spreadsheets in the initial stages of a startup company, the owner should establish a certain set of reporting guidelines. These steps may appear simple, but they can help to ensure that your company’s financial health remains strong.

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