Management reports: What’s best practice?
First of all Management accounting requires management 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:
1 What is the report trying to achieve?
2 Who is the target audience for the report?
3 Which information does your audience need to read?
4 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:
Retention of customers
Marketing data- e.g. website analytics
Staff data, including
Training and competency
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:
● capital costs – as depreciation is used instead
Reviewing the management information
Finally once the appropriate management information is collated and presented, you should use it to help inform your decision making. In contrast 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.
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