Definition: The management report is a means of communicating essential information from high to low levels of management. It consists of facts and significant data presented through written, oral and visual tools (Graphs, Charts and Pie-Charts).
It provides an insight about the departmental progress through financial and non-financial data of a specified period. Timely presentation of reports helps managers in management functions like:
These reports maximize the time usage by constant evaluation. It highlights the variance (if any) between actual and planned/budgeted performance at regular intervals and applies corrective measures accordingly. Also, it tracks the key performance indicators(KPI’s) of the business.
Content: Management Report
Methods of Management Reporting
There are different means of representing managerial reports. The selection of reporting method is based on the type, size and nature of data. It is expressed through written, oral and visual means of communication. These are discussed briefly below:
In this method, the report is prepared and communicated in the form of statements and ratios. It is further divided into:
- Formal Financial Statement: These statements convert large data into a simplified form for comparison purposes.
- Tables: Reports are prepared in a tabular form, indicating the present and planned performance of different departments like sales, production, etc.
- Ratios: Different types of financial ratios are calculated according to the purpose. They are used for further analysis and representation of data.
Managers can conduct meetings, group discussions, conferences, etc., for decision making. This form of reporting cannot be considered at the time of taking crucial decisions. It is used for internal management, policy formation and team-related issues.
The data is depicted in graphical form. These reports are easy to understand, analyze and visually attractive. It can be presented through:
- Pie Charts
- Bar Diagrams
- Flow Charts, etc.
Types of Management Reports
As discussed above, management reports are made considering the nature, volume and purpose of the data. Keeping in mind the following questions-
- Why is it being prepared?
- Who is the sender?
- Who is the receiver?
- Which method is adopted for the preparation of the report?
Following are the types of managerial reports which can be used for reporting based on different purposes:
Managers use these reports to identify the gaps between the actual and budgeted targets. It is done for both the short term and long term to maintain the organization’s operating efficiency. It is further divided into:
- Control Reports: It is presented monthly, quarterly and yearly to control deviations and take corrective measures in areas such as sales, income, etc.
Control reports are prepared periodically, which can be classified as:
- Current Control Report
- Summary Control Report
- Information Reports: It covers a broader area than control reports. These reports need more information its examination, and analysis. Management uses these reports for planning and policy formulation.
Financial reports contain information about the financial position of the business. The movement of financial resources is estimated for a specified period. It is further divided into:
- Static Financial Reports: This report shows the position of assets, liabilities and debts at a point in time. For Example, Balance Sheet.
- Dynamic Financial Reports: When we summarize the change in the financial position, these reports are used.
Reports are made based on comparisons over a period of time. It shows a certain type of movement or trend through graphics.
The data is reported by analyzing the comparisons with the predetermined objectives. It is made horizontally, between one or more firms or departments.
By Functional Area:
An individual report is a report prepared by a person responsible for that particular activity. For example, a report is prepared by the manager of the production department.
A joint report is a report prepared by the managers of all the departments jointly. For example, a profit and loss statement is prepared for the business considering the report by the production department.
These reports are prepared for the use of internal management. The information is communicated to employees and different levels of management. It consists of:
- Routine Reports
- Special Reports
- Reports at various levels of management.
It is prepared for providing various information to the external parties like:
- Government Authorities
- Stock Exchange
- Credit Institutions
Process of Management Reporting
For preparing management reports following steps can be followed:
Importance of Management Report
- It is a good means of maintaining public relations.
- Reports enable us to identify trends which helps in forecasting.
- Helps to achieve the overall objective by timely and continuous evaluation.
- A management report is a tool for the controlling function of the management.
- These reports satisfy the internal and external parties related to business.
- The comparison of actual and planned targets are made, and suitable actions are taken.
- Management reports lead to effective and efficient management.
Qualities of a Good Report
- Accuracy: Management reports contains facts and figures which may be misunderstood if not recorded accurately.
- Suitable Title: The title of the report should be self-explanatory. It should specify what that report consists of?
- Precise and Simple: Only the necessary information should be reported in simplified form. Unnecessary information should be excluded.
- Consistency: The report should be prepared in a fixed format. It helps in avoiding confusion and maintaining the standards.
- Reporting Relationship: There should be clarity in the source and destination of the report, i.e. who is making the report for whom.
- Timeliness: Management uses these reports for decision making and policy formulation. Reports should be prepared and presented at regular intervals.
- Cost-Effective: Preparation of the report should not add unnecessary expense. The cost should not exceed the benefit from the report.
- Selective: The mode of presentation should be selected in a way, which represent information in the best possible way.
- Comprehension: Management reports should be made in a simple and systematic form. The end-user should understand it easily.
- Unbiased: It should convey true facts and figures and doesn’t get affected by the personal bias of the person.
Example of Management Report
The following example shows the report of the production department, its budgeted production and actual production through tables and charts.
- The actual production was less than the budgeted production in the first quarter.
- It gradually started to increase by the end of the first quarter.
- They are able to produce the budgeted target in the second quarter.
- In the third quarter chart shows the increase in production units.
- The department is able to meet the budgeted targets at the end of the fourth quarter.
The production department inspected the variance between actual and budgeted targets.
The manager took some measures to increase the production:
- Training and Skill development program
- Changed its production policy
- Improved its communication channel
- Maintenance of machinery
A management report is an important tool to convey essential information to different levels of management. It facilitates the control function of management. These reports also highlight the area of concern and take remedial actions accordingly. It results in increased efficiency and effective decision making.
Reports should be presented on a timely basis. The type of report is based on the purpose of the presentation. The best and attractive method of communication should be chosen.