Yes, of course you do. But in order to improve, you have to know where you are today and understand what's holding you back. Is it an unreliable supply chain? Bad debtors causing cashflow problems? Or some other cause that you haven't yet discovered?
Having access to regular, timely and accurate management reports can quickly help to identify any anomalies within your business, enabling you to:
All that's required is the motivation to start doing things better. And a little help if you're not sure where to start.
Why companies shy away from management reporting
There are a number of reasons why many small businesses don't have effective management reporting in place. Usually this is because the departmental managers don't have time, or because the systems in place aren't capable of providing meaningful management reports.
Consider the following case:
It's the first day of a new month and Jim and Bob, managers at competing manufacturing companies, have the task of producing monthly reports for their respective directors.
Jim is dreading the task. He's going to have to extract information from several different systems into a number of different Excel spreadsheets, filter out all the data that isn't needed, look back into last month's reports to copy the formulae required to produce the required figures, create a couple of pivot tables (he always has to look at his cribsheet to remember how to do that), save the files to the server and then email copies to all the directors. It'll probably take him most of the day and he's got tons of other stuff to do.
Bob, on the other hand, will walk into the office to find the monthly sales figures and production figures already in his inbox, along with a current profit and loss statement and an aged debtor report; they've been produced, formatted and emailed to him automatically. He'll then log on to the company intranet where he can find the latest timesheet summary report showing staff attendance figures and salaries for the month - updated weekly by the same reporting system - along with an inventory report highlighting low-stock items and expected delivery dates. Seeing no issues with any of these, he forwards the reports to the directors at 09.30 and, with a sense of achievement, starts to plan his team's activities for the week.
Management Reporting is only an effective tool if the right information is available at the right time. If a lot of manual effort is involved in the production of reports, it's highly likely that they will not get produced in times of crisis - and that, ironically, is when good reporting is essential.
So what can Jim do to make his life easier?
Take small steps, see big improvements!
There is no standard "package" of management reports to fit all types and sizes of company. Even if there was, having access to a whole suite of new information in an instant would be so overwhelming that much of it would probably get overlooked.
Q: How do you eat an elephant?
A: One bite at a time.
The trick then is to use small steps to effect big improvements.
: Identify the biggest problem area
What is the main thing that's stopping you achieving your business dream? Identify that and make it a priority to measure and manage it on a regular basis (weekly, say). So if cashflow is an issue, make it a policy to monitor aged debts on a weekly basis. If profitability of sales is an issue, review your purchasing costs and your sales quotes regularly to ensure that margins are being maintained at an acceptable level.
Look for the simplest reporting solution first
Having identified a problem to concentrate on, look for the simplest way to get the information you need on a regular basis in order to address that problem. It may be that you have to resort to manual extracts of data into Excel. Alternatively, it may be possible to use Excel to interrogate the data directly, which could save a lot of time (this will be covered in an upcoming article, so keep an eye out for that).
Either way, it's unlikely that you'll get your ideal reporting solution straight away. But you will start to understand what information you need in order to be able to do the task properly and will be able to devise a better reporting strategy. More importantly though, by continuing to monitor the problem, you'll be able to see the effectiveness of any resoluions you put in place.
Design your ideal reporting solution
Now that you know what information you're looking for, what's the best way to get that information in the most usable format?
- Do you need the information on a regular (monthly, weekly or even daily) basis? If so, then emailed to you directly or available on an intranet / web server could be the best option.
- Do you need the flexibility to change the information you're reviewing (different date ranges, customers, product types, etc.) depending on how well the business is doing? If so, an interactive report would suit you better.
- Do you need detailed figures or just confirmation that the business is performing to plan? Graphs and charts are very powerful tools for comparing actual vs. expected figures, with detailed reports used to analyse any discrepancies.
Choose the mechanism that is most likely to work for you. As you build up your management reports library, you're likely to embrace a variety of different report delivery mechanisms, tailored to suit your specific information requirements.
Step 4: Iterate and improve
As with any aspect of your business, the management reporting element isn't set in stone; as your business changes, so will your reporting requirements. Don't be afraid to revisit any of your reports to add new information, change the criteria on which data is selected, or deliver via a different mechanism. Nearly all of our customers have started their management reporting journey in this way: taking small tentative steps and then requesting additional features, additional reports and increased automation as time goes on.
We hope that this article has given you some interesting insights into management reporting for small businesses - and perhaps even inspired you to think about how an efficient reporting strategy could work for your company.
In the next post, we'll look overcoming the reporting limitations of IT systems by using third-party tools, including Microsoft Excel.
In the meantime, if you're keen to learn more about how management reporting can help your business, please contact us
for a chat.