Financial and management reporting are vital to your company’s success. Financial reports are required by shareholders, investors, and stakeholders, while management reporting gives you business intelligence. However, if you leave the reporting to just one person, it may be sensible to rethink your approach. Before hiring a specialist though, it is important that you understand the distinctions between financial and management reporting. Read on to find out more.
What is Financial Reporting?
Financial reporting is the process of providing financial statements and information to company stakeholders in order to drive business goals. There are three important aspects in financial reporting: cash flow, profitability and the value of assets. The person tasked with preparing these reports must have an understanding of the different financial statements as well as the accounting standards that your company is required to adhere to.
In financial reporting, company stakeholders will look at the:
- St Comatement comprehensive Income (Statement of Profit and Loss)
- Statement of Financial Position (Balance Sheet)
- Statement of Changes in Equity
- Statement of Cash Flows
- Accounts that are to be paid
- Accounts from where funds are coming in
- Statement of transactions
It is imperative that your company’s financial reporting is done accurately by accounting and finance professionals who possess a sharp eye for detail. This ensures that your financial reports remain accurate and consistent.
While financial reports provide you with financial ratios and help you fulfill regulatory requirements, they are not ideal for decision-making. They give you a bird’s eye view of your business operations, but without actionable insights or granular data that are useful for making strategic decisions. These insights which will also enable you to assess changing expectations, identify challenges and forecast trends.
What is Management Reporting?
A management report is a report on a business’ results, issues and risks. It may include revenues, net margins, customer acquisition costs, customer lifetime values and customer satisfaction rates. In short, a management report identifies opportunities and reveals a company’s overall performance.
When prepared well, management reports can address questions such as:
- Have I met my key performance indicators (KPIs)?
- Have I priced it right?
- Who are my most profitable clients?
- Should I hire more employees?
- How much should I pay them?
- Where should I spend my marketing dollars?
Management reporting is key to your company’s performance. Management accountants typically send management reports to managers, executive management and governance bodies on a monthly basis. Using the information in these monthly reports, stakeholders would then make decisions about the company’s profit points, performance, and take tactical steps to benefit the company as a whole.
Beyond internal reporting requirements, management reports are increasingly trending to include relevant information on the external environment that influences a company’s performance. Such information may include customer preferences and regional market shifts and serve to provide a comprehensive view of the business.
It is important that management reporting is done by a critical thinker with razor-sharp analytical ability. This helps them interpret reported numbers and financial statements, identify trends, and exercise good judgment in order to solve problems.
The Difference between Financial and Management Reporting
Most companies tend to want to hire a single person to prepare reports for both financial and management reporting. However, this is not advisable due to the following reasons:
Difference in objective
Financial reports look back in time to review how your business has performed in the past year, while management reports look ahead and make predictions about the future growth and profitability of your company.
Financial reports also shows your company’s overall performance at a given time, while management reports can be further segmented by product or department.
Difference in audiences
Financial reports are read by external audiences such as banks, authorities and investors. Management reports, however, are read by business owners, CEOs and management.
Difference in standards and guidelines
Financial reports must adhere to a set of accounting standards and guidelines, while management reports may have a different set of internal guidelines and preferences.
In short, financial reports are mandatory as they are required by tax authorities, regulators and banks. Though management reporting is not compulsory, it will help your business identify areas to improve on.
Quick Tips on Management Reporting
Before preparing your management report, read on for three useful tips:
Begin with strategic goals
Before generating charts and graphs, determine the objective of your management report and set two to three goals. The goals should address how success is defined.
Present historical data
For an overall storyline on your company’s performance, present your data trends over time. Presenting data for a certain time period would tell the complete story from the beginning to the end. For instance, compare the revenue graph for Q1 this year compared to Q1 last year.
Contrast targets and actual performance
Contrast targets set with actual KPI metrics to reveal if your company has under-performed or exceeded expectations. For instance, reflect your target revenue amount against the actual revenue collected.
Let Corporate Services Singapore Guide You
If you are looking for a specialist in either management reporting or financial reporting, we have the perfect solution for you.
Enjoy lower fixed costs and accurate and timely financial reporting when you engage Corporate Services Singapore. We work on a team-based model with qualified accountants who will keep your business up-to-date with the changing accounting and financial regulatory requirements.
Our professional advisors are also able to identify opportunities and spot flaws within your company’s internal practices. This is a value-added service provided by Corporate Services Singapore to ensure your business’ operational and financial health. We will also advise you to act on any shortfalls within segmented areas immediately.
Access expert financial advice and solutions and stay on top of your business with Corporate Services Singapore. To find out more about our customised outsourced accounting services and management reporting value-added services, give us a call at 6602 8286 or email us at email@example.com to get started today.