It's all too common for decision-makers in SMEs to make decisions, both big and small, without any solid evidence. Rather than examining important data and assessing different options, management ends up making decisions based on their gut feelings. This is often because many small companies don't have access to qualified accountants to help them understand financial data to make evidence-based decisions. Even those that receive management reports may not be using them effectively. Less than 50% of FTSE100 companies align their reporting with their objectives, and the number is lower in smaller businesses.
The Importance of Management Reporting
Management reports are different to financial reports. There are various types of information that can be gained from management reporting, depending on the needs of stakeholders and decision-makers, as well as managers. Managers can provide feedback on what types of data they need to help them gain insights and make better decisions so that they can improve productivity and profitability.
As a minimum, management reports should include Profit and Loss statement, Balance Sheet Statement and Cash flow statement to get 360 degree view of the monthly peformance. These data needs to be compared with the budget and previous years data. Key descrepancies need to be identified and explained.
When businesses work with qualified and experienced accountants who can produce monthly management reports, they put themselves in a better position to achieve their business goals.
The Benefits of Management Reporting for SMEs
Management reporting delivers a range of excellent benefits for small and medium businesses. Management reports can help businesses to save money, increase revenue and make better use of their time.
Make the right decisions at the right time
Management reporting enables businesses to make important decisions at the right time, using valuable data to evidence those decisions. It can help with choices such as reducing spending when revenue is lower, hiring new staff when business is booming, or reviewing key processes to boost sales value.
Continually improve
Using management reports can support continual improvement in your business. Managers can keep making adjustments to business performance when they have the data that they need to make better decisions with both current and historic data reports.
Bring finance into meetings
Management reports ensure meetings between managers take financial data into account. Decision-making is conducted with more insight into costs and cash flow.
Measure and manage
Measuring core KPIs enables businesses to ensure they are being managed. It encourages action on important issues so that the business can secure optimal results.
SMEs Need Management Reporting
Some people might think that smaller businesses do not need management reporting. However, this couldn't be further from the truth. SMEs can benefit from management reporting just as much as larger corporations. In fact, given the lack of proper management controls the need is greater. If you want to grow your business and make better decisions backed by data, your business can gain an advantage through monthly management reports.
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