Design a management reporting system

A management reporting system is a structured method in which to capture data essential to the management of the business. The reports produced comprise crucial data needed to monitor the business on a regular basis. The reports should be concise, yet telling, and every element that is reported on should contain information that is relevant to achieving the goals of the business.

The purpose of management reports is to monitor both the overall success of the business and performance against the plan. It is useless to set up Key Performance Indicators if they are not being monitored and managed. By creating management reports it is possible to see downward trends early and to take action to prevent them from further declining. Alternatively, it is possible to see upward trends and determine what is going well and possibly apply that concept across the organisation - in particular to the areas that are not doing so well.

In designing a management reporting system, base it on KPIs derived from the business's strategic plan.

Process And deliverables

1. Gain an understanding of the strategic business plan

   
   Determine from management the strategic direction of the business. To the extent they have a documented business plan, gain an understanding of it and the goals the business is trying to achieve.

   NOTE: If you do not have a strategic business plan, we recommend that you design one - but don't let the lack of a plan prevent you from completing this project. You can come back to the strategic plan later. At this stage, simply outline your business goals and use those as the basis for designing critical success factors.

2. Review the CSFs and their associated KPIs to ensure they are still relevant

   
   NOTE: The design of CSFs is a separate piece of work. The design of a KPI system is also a separate piece of work.

3. Review the current management information system

   
   Many small businesses have very limited management information systems. As a bare minimum, you should be able to access profit and loss account and balance sheet information on a timely basis. If you do not have such a system you need to take a separate step to develop one. Off-the-shelf packages can be acquired for a modest cost and some are capable of supporting quite decent-sized businesses.

4. Design the management reports

   
   Based on the KPIs established, determine what the key activities are that need to be monitored and reported. It is important to ensure the availability of data and ease of collection. In particular, think about data that will not just “drop out” of any installed accounting package.

   Try to ensure that the measures cover all key aspects of the business not just financial, e.g. sales volumes, team turnover, operational efficiency, key account status and new product development progress.

5. Design the reporting system


Determine:

• How data will be captured
• Who will be responsible for entering and consolidating the data
• How data will be presented - think particularly of easy-to-read / interpret graphics such as Stop Lights where a single page can be used to gain a
  snapshot of the entire business
• Frequency of reports
• Recipients of reports

 

Create the structure/process to implement the management reporting system.

Deliverables

A management reporting system that enables proactive management of the key processes in the business. The system should include, at a minimum:

 

1. A list of the management reports along with the recipients
2. Frequency of reporting and a timetable for production of all reports, i.e. end dates for input, processing, output and reconciliation, presentation
3. Responsibilities for providing input data, outputs, delivery of reports, and identity of key managers responsible for performance in each area being measured
4. Sources of all input data should be identified

 

Do's

Discuss and agree on those things considered important to measure.

Ensure that all KPIs are in place to create the management reports.

Educate your team on how to use the management reports properly.

Ensure that there are guidelines around what is acceptable in the reports and what is not.

Think broadly across the business about what really drives performance, not just easy-to-measure financial outputs.

Don't's

Use just the KPIs that have been established - determine if there are more that are needed.

Blindly use the reports and KPIs produced by a software package if they're not relevant to, or are inadequate for, the business.

Go beyond the scope of the project. If you need a management information system or the design of KPIs these are separate pieces of work.

Assume that this is a one-off exercise. The system and reports will doubtless be capable of refinement and improvement with experience.