Management reports: What’s best practice?
Firstly, effective decision making requires Effective Management Accounting Reports. Management accounting tells your business story on a more regular, efficient and informed basis.
For this reason you should design the layout and content of your management accounts to provide the most useful data to enable good business decisions.
So when designing a good performance report there are four key considerations:
- Firstly, what is the report trying to achieve?
- Secondly, who is your target audience for the report?
- Thirdly, which information is useful for your reader to help understand and make decisions?
- Lastly, how should you present the information?
Consequently don’t just focus on the financial results. Cash in the bank, profits and debt are important but so is other stuff. Your success depends on your business achieving its mission and objectives. Therefore your management report should reflect your mission and objectives.
So it is important that your management report is relevant to your audience’s needs. It also needs to be easy to use, comprehensible and fit for purpose.
Remember these important qualities
- Include what your audience needs .
- Benefits need to be more than the costs .
- It makes sense, don’t overuse jargon.
- Don’t include things that aren’t relevant.
- Likewise don’t drown people in numbers.
- Charts and visuals are useful.
- Give out the report promptly after the end of a month
- Produce the report as often as needed.
Combining management accounts with non-financial information
To get the most out of management accounts, the data should be combined with relevant non-financial information. Types of non-financial data can include:
A narrative giving context to the data – i.e. if the work is seasonal
Customer data, such as:
- Feedback satisfaction
Retention of customers
Repeat orders
Marketing data- e.g. website analytics
- Staff data, including
- Personnel performance
- Training and competency
Compliance reports
Costs excluded from management accounts
Not all costs are to be included in the management accounts, as they may not help with management decision making. These are mainly profit-sharing costs:
● dividends
● capital costs – as depreciation is used instead
Reviewing the management information
Finally, Effective Management Accounting Reports needs you to use the information that is collected analysed and presented. If not, you are wasting your time. Many inexperienced business managers produce reams of management information, but then ignore the data when making decisions. Consequently this can lead to mistakes and missed opportunities for improvement, which could significantly improve your business’s viability.
Good to know
Effective management reviews and acts in harmony with your Financial Story Plan, and cash flow. Are you ignoring your Financial Story Plan, your Cash Flow? Are you sticking your head in the sand or covering your eyes, hoping everything will be fine tomorrow or, perhaps, by next week? Sorry to report, but it won’t!
Numbers Know How , a Financial Story telling community, supported by I Hate Numbers has the solution to take all that worry and uncertainty out of the equation:
Are you ready to have an easier and more rewarding relationship with your numbers? Make them work for ? The grab a copy of my book I Hate Numbers. It’ll help you understand and be a better business owner. According to one reviewer “This is the best, most straightforward, pragmatic, and enjoyable book I’ve ever read on finance for business.
It’s a must-read for all entrepreneurs. Your clarity, humour, wisdom, and great advice shine through as you make numbers accessible and easy for everyone.”