Management Reporting

Management reporting is a tool that allows an organization's managers across all levels to identify, monitor, and measure the key performance indicators (KPIs) to gauge the business's performance against the predetermined goals. Businesses can use the KPI information to take crucial operational decisions that can improve organizational efficiency.

Collecting data provided to the top managers can help them identify the business's key strengths and weaknesses. Moreover, the information can offer crucial insights into the current strategies' success. This, in turn, allows businesses to take the necessary steps to improve. There are different types of management reporting, for example, external and internal reports.

• Management reporting meaning refers to a means of communicating crucial details to managers of all levels, helping them make informed operational decisions. As a result, it enables a company's decision-makers to improve business efficiency and performance.
• The different types of management reporting are analytical, operational, and internal reports. Two examples are sales and marketing reports and scheduled reports.
• Management reporting involves collecting information for internal purposes, unlike financial reporting.
• Individuals must decide on the management reporting method after considering the size, type, and nature of the data they must convey.

Management reporting meaning refers to the accumulated information sent to a company's decision-makers to help them run operations efficiently. Managers utilize this tool to monitor the KPIs, make prudent business decisions, and compare the business's performance against that of competitors. Such decisions may range from minimizing costs to determining how many employees should be in a team.

Typically, these reports are published regularly; they may include information related to operations, customers, finance, etc. Timely presentation of the reports assists a business's managers in the following key functions:

• Organizing
• Planning
• Directing
• Controlling

The information conveyed to the decision-makers regularly highlights deviations between the actual and budgeted or planned performance. This enables the managers to take corrective measures and improve the business's performance.

The choice of management reporting method depends on the size, nature, and data type. First, let us look at the different methods available.

• Visual Report: These reports represent information in graphical form. As a result, managers can analyze the data easily. For example, one can use bar diagrams, pie charts, etc., to prepare visual reports.
• Written Report: It is a written form of communication. Written reports usually include ratios, tables, and formal financial statements. 
• Oral Report: This involves conducting group discussions, conferences, and meetings, to convey crucial information. Organizations may use oral reports for policy formation, resolving team-related problems, and internal management. 

Let us look at the main types of management reporting.

#1 - Analytical Reports 

This kind of reporting involves using quantitative and qualitative data to analyze and evaluate the effectiveness of an organization's strategies. Analytical reports can provide estimates and trends for improved decision-making and business innovation.

#2 - Internal Reports 

The purpose of internal reports is to report on managerial tasks. Such reports must adhere to the set legal standards and are typically prepared for all management levels.

#3 - Operational Reports 

These reports aim to monitor different metrics' operation or performance. The preparation of such reports usually occurs daily, monthly, or weekly. Managers can utilize the information in such reports to minimize costs, optimize business performance, identify trends, and improve the organization's daily operations.

Let us look at this management reporting example to understand the concept better.

The following is the half-yearly production report of Panther T-shirts, a t-shirt manufacturer. This table shows its actual and budgeted production.

From the above production report in tabular format, John, the production manager of Panther, can get the following details:

• In the year's first quarter, the production was less than the target.
• Production started to increase in March.
• At the end of the second quarter, the production department was able to fulfill the target.

This table allowed John to identify the deviations between the actual and budgeted production.

One can go through the following points to understand the benefits of management reporting:

• It helps managers understand the factors impacting their business. This, in turn, allows them to formulate strategies to improve business performance.
• The information presented in the written and visual reports enables the managers to analyze the business performance quickly.
• It helps managers identify trends. This allows them to make better business decisions.
• The reports help an organization's top decision-makers understand the KPIs and set performance goals.
• Managers can measure the business's overall health with the help of the data provided in the reports.
• The information helps managers prevent unnecessary expenses and losses.

The limitations of management reporting are as follows: 

• Identifying relevant data for specific applications can be challenging.
• The data presented in the reports can be overwhelming for large organizations with various departments.
• Organizations must have adequate resources to process all the information from different areas.

Some of the best practices for effective management reporting are as follows:

• Start by clearly defining the objectives.
• Ensure to include KPIs.
• Make the report visually appealing so that managers can analyze the data quickly.
• Keep the information crisp and to the point.
• The report must be useful for the audience — shareholders, managers, or creditors.
• Consider integrating customer feedback.

Individuals new to the business world often find management and financial reporting confusing. That said, they must know about their differences to understand their meaning and purpose and eliminate such confusion. So, Let us look at their distinct features.

This article has been a guide to what is Management Reporting. We explain its example, types, importance, best practices, disadvantages, and best practices. You may also find some useful articles here:

• Management Information System
• Enterprise Risk Management
• Management by Exception