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Is your management reporting really up to scratch?

It is extremely important that management has accurate, useful and timely management information upon which to make decisions. Unfortunately the level of information many businesses have at their disposal today is limited.

While many owner managers have access to regular profit and loss statements directly from their accounting system, the data is normally in a raw unedited form and includes no comparison to budget or last year. The information is there but, without the input of a skilled finance resource, exactly how useful is it?

So what is good monthly reporting?

- The information needs to be accurate and up to-date. Rubbish in means rubbish out and if the quality of the data is in doubt, the resulting reports will be of little use to the business and will result in wrong decisions being made.
- The information needs to be timely. As a rule of thumb flash reports should be available to management within 7 days of the month end, with a full management report pack to follow 1 to 2 weeks thereafter.
- Monthly reports should be concise. Too much information can lead to information overload making it difficult to identify the important trends in the business.
- Include graphs and charts to present trends and identify key issues. Pictures are often easier to interpret than straight numbers.
- Reports need to be forward looking rather than just historical. The best way to achieve this is to include forecast and/or budget projections.
- Lastly take ACTION! So often management is too slow to react to serious trends such as low gross margin and rising costs.

It is also essential that SME's identify those indicators which will help measure if the business is on track towards achieving its goals. It is easy to come up with a long list of key performance indicators (KPI's) but that would be missing the point. Each business is different, with different issues and therefore the key is to identify the KPI's that will work for that business.

For example, a client in the automotive industry is focused on improving the productivity of its technicians. The best productivity indicator in this industry is hours sold per technician. In a hairdressing business key indicators would include gross margin per salon; average price per service; and sales per stylist.

The key thing is to identify the vital few indicators applicable to your business and measure these religiously. Once KPI?s are agreed they can be used in incentive and bonus schemes whereby employees are rewarded for achieving agreed targets.

Today more businesses are using non financial indicators to measure performance. Examples include; customer satisfaction surveys; enquiry conversion rate to new customers; customer complaints; levels of customer service; days lost through sickness; machine hours etc.

Whatever the KPI, financial or non financial, ensure they are defined and measured in a consistent and objective way. Focus on the vital few that will make a real difference to your business. Finally, ACT on the results; if they are great look at rewarding staff and investing in the future; if bad investigate and take corrective action, fast.

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