Management reporting functionality and basic reporting forms

To make decisions, owners and managers need timely and detailed information about business performance. This information can be obtained from management reports. The financial statements do not meet these criteria, they are tailored to the requirements of the Federal Tax Service. The owner needs a real and relevant picture.

Why do you need management reporting:

• it contains all the information necessary for making current decisions by management
• it allows you to make forecasts, helps with short-term and long-term planning
• it provides detailed information on key indicators, products
• it helps to find weaknesses, inefficient allocation of resources
• management reporting will help to report the results to shareholders
• management reporting is analaysed by banks when making decisions on financing

You can include all the necessary data in the consolidated perimeter of management reporting data, regardless of where these operations are reflected - on legal entities, individual entrepreneurs, individuals. It all depends on the requirements of the users of the reporting.

The frequency of reporting can also be adjusted to the needs of users: some indicators need to be viewed daily, some weekly, monthly or quarterly.

Management reporting allows you to make a detailed analysis of the business: calculate the margin for products / services, for operating result, net profit, EBITDA; determine the seasonality in sales of products / services; detect cash gaps, identify reserves, optimize the ratio of equity and debt capital.

The actual data of management reporting will help you to timely identify deviations from the plan within the framework of the plan-fact analysis.

A convenient option for presenting key indicators can be a one-page dashboard. The user can take a look at it and determine the state of the business. It is often compared to the dashboard of a car or airplane.

At the same time, it is important to carefully select key indicators and track them both statically and dynamically. You can select the required levels of analysis for key figures: by business unit, financial responsibility center, product, region, etc.

For management accounting you can use Excel, Power BI, solutions based on 1C, ERP - systems. The optimal solution depends on the size of the business and the requirements of the reporting users.

Management reporting must contain three reports:

• statement of income and expenses;
• cash flow statement;
• management balance.

In addition to these main reports, you can maintain a number of others for more detailed information: a report on the implementation of a sales plan, a marketing plan, a report on the cost of sales, on accounts receivable and payable, etc.

How to organize management accounting correctly:

• it is necessary to define the circle of users of the report
• users should define key indicators for monitoring, reporting frequency
• identify data sources, organize regular data collection
• develop the structure of the report
• automate the process of drawing up management reporting

It should be borne in mind that reporting is prepared to make real management decisions. It should reflect the real state of affairs in business, and not formal indicators. Only with such tools the owners and managers will be able to direct all the resources of the business to its development.