One of the key surprises for many business owners is how much information is involved in all aspects of running a business.
Of course, you expect to need sales reports and expenditure. Par for the course.
But data and reports are the very basis for so much more.
For starting a business successfully.
For growing a business and even for selling a business.
They are the key to making confident and sound organisational decisions. Financial reports and management reports serve as important tools for reviewing past decisions and making correctional changes to steer a business forward.
Crucially, reports contain and present business data that provides vital insights for the owner, the management team and employees, as well as to external stakeholders.
Finance Reports v Management Reports – what’s the difference?
As a business owner, you’ll be familiar with the financial/statutory reports (such as statutory accounts, tax returns and VAT returns). The ones you need to produce each year to meet the Companies House/HMRC regulations.
However, you might not be so au fait with the management reports that are helpful, if not vital, if you want your business to grow.
Management reports contain information that will help you improve your processes, review the performance of staff, products and services and ultimately make decisions that will drive your future profitability.
In essence, the difference between financial/statutory reports and management reports is pretty straight forward. Financial/statutory reports look backwards at a high level. They contain data based on what has already happened in the business, often produced on an annual basis.
Management reports can also look backwards, but at a much more detailed level.
However, their usefulness lies in their forward facing focus. The combine detailed financial information alongside operational information to forecast the future performance of the business.
Management reports allow you to see how various functions of the business are doing. They allow you to analyse and improve the performance of different departments via KPIs that have been set or how accurate budgets are versus actual expenditure. Management reports are usually produced much more frequently than statutory reports, often on a monthly or even weekly basis.
Spot issues early on
Management reports, unlike financial reports, are not mandatory. That said, your business will benefit by ensuring that you have those reports available and that you set aside time each month (or even each week) to review them. One key benefit of taking the time to produce and review both types of reports is that you will be in a strong position to identify problems or issues before they become serious.
For example, if you notice a decline in sales figures in your management reporting, you can use this to take corrective action before it is too late. Spotting those red flags early can make a big difference to those annual sales figures.
For many business owners, finding time to produce and analyse both financial and management reports can feel unnecessarily burdensome. Unless you naturally enjoy looking at numbers, this part of running your business is going to be heavy going.
However, doing so allows you a complete and early overview of your business’s financial health and performance. This gives you clarity for important decisions that can positively affect your business as you grow. So, while the investment of time and effort may be high, the rewards are far greater!
Finally, it’s worth bearing in mind that while statutory reports will often be produced by an external firm of accountants, management reports are both more complicated and easier to get wrong. Focus on the wrong information, and they will be worse than useless. For this reason many businesses prefer them to be produced by their internal finance team who are close to the business and understand it well.
So, you need both financial and management reports
Suffice to say: to get good management reports which will support your decisions, you need the right finance team in your business. Build that team well, with the right finance professional at the helm, and the reporting work is already half done!
Get in touch to find out how we can help you identify exactly what level of finance leadership you need. We can then use our extensive resources to find you the perfect candidate to help shape your business.