Elec 2 - Management Reporting PDF

**MANAGEMENT REPORTING** - refers to the process of collecting, analyzing, and presenting data to help managers make informed decisions. - It is part of the management control system which provides adequate business information to various levels of management in the forms of report...

**MANAGEMENT REPORTING** - refers to the process of collecting, analyzing, and presenting data to help managers make informed decisions. - It is part of the management control system which provides adequate business information to various levels of management in the forms of reports and statements at regular intervals. - A body of information organized for presentation or transmission to others. It often includes interpretations, recommendations and findings with supporting evidence in the form of other reports (Eric Kohler). - These reports are not mandatory and is for internal use only. - Instead of an overall evaluation of the company, management reporting is focused on segments of the business. **FINANCIAL REPORTS VS MANAGEMENT REPORTS** - It is compliance oriented and is used for external purposes. - It encompasses the standard weekly, monthly, and quarterly reports that companies receive each month which include: - Profit and Loss Statement - Statement of Financial Position - Statement of Cash Flows - Mandatory for all business - Reflect the financial standing of the business at a specific point in time **WHAT'S THE DIFFERENCE?** +-----------------------------------+-----------------------------------+ | **FINANCIAL** | **MANAGEMENT** | +-----------------------------------+-----------------------------------+ | - External | - Internal | | | | | - Mandatory | - Optional | | | | | - Overall | - Segmented | | | | | - GAAP | - Not GAAP | | | | | - Past | - Future | +-----------------------------------+-----------------------------------+ **ESSENTIALS OF GOOD REPORTING SYSTEM** 1. **Proper Form** - A good report should have a comprehensive form with suggestive title, heading sub heading and number of paragraphs as where necessary for easy and quick reference. 2. **Contents** - Simplicity is one of the requirements of reporting in relation to the contents of a report. Further the contents should follow a logical sequence. Wherever necessary, the contents should be represented in the form of visual aids such as charts, diagrams, etc. 3. **Promptness** - Should ensure the preparation and submission of report at the proper time. It facilitates business executives to make suitable decisions based on quick reports without delay. 4. **Accuracy** - Information conveyed should be accurate. This means that the person responsible for reporting should have sufficient care in preparing the report as correctly as possible within the parameters of possible accuracy in this regard. 5. **Comparability** - In order to ensure that the furnished information is useful, it is essential that reports are also meant for comparison. The report should provide information about both the actual and budgeted performance of the budget period. 6. **Consistency** - In order to make a meaningful and useful comparison, uniform accounting principles and procedures should be followed on consistent basis over a period of time. 7. **Relevance** - The report should be presented with relevant data to disclose the fact in unambiguous terms. Because, inclusion of both the relevant and the irrelevant data in the management reports may result in faulty decisions. 8. **Simplicity** - The report should be as far as possible in simple form. In other words, the report should avoid technical jargons, duplication of work and presented in a simple style. 9. **Flexibility** - The system should be capable of being adjusted according to the requirement of the users. **BENEFITS OF EFFECTIVE MANAGEMENT REPORTING** 1. Improved decision-making 2. Improved management effectiveness 3. More efficient use of resources in the delivery of organization services 4. Increased confidence in the quality management decisions by agency and staff 5. Improved responsiveness to issues as they arise **WHY YOUR BUSINESS NEED BOTH FINANCIAL AND MANAGEMENT REPORTING?** - If you do not receive management reporting each month, you could be missing out on information that can help your company grow or prevent you from implementing costly programs that do not provide ROI. - Your business needs financial reporting for compliance, making sure the numbers are adding up and to prevent cash flow problems. You also need management reporting so you can make better business decisions backed up by solid data. **HOW WILL YOU CHECK IF YOUR FINANCIAL STATEMENTS ARE CORRECT?** 1. **Balance Sheet** - Negative Balances - Misapplied Payments - Raising Debt-to-Credit Ratios 2. **Income Statement** - Big Profit/Small Cash Flow - Decreasing Non-operating Income 3. **Consider the Accounting Methods** - Cash Basis Accounting - Accrual Basis Accounting