With business uncertainty still running high as we emerge into a post-Covid world, now is the time to be on the business and not just in the business. Management reporting is the key, says Gary Wong.
Running your own business or managing a growing business is, as we all know, a real challenge. It is all too easy to focus on the immediate challenges and the day-to-day grind of business life. Successful business leaders recognise and understand the importance of taking time to ‘get on top of the business’ and not just being ‘in the business’.
Having up-to-date and relevant management information is key to making effective and informed business decisions.
For larger businesses, the holy grail is being able to capture and analyse the large amounts of data a business generates in a timely manner and in a way that provides clear, accurate and relevant information for management teams, providing the insights to help them make strategic decisions.
For smaller businesses, this should be no different, although the data generated may be considerably less than, for example, a large consumer facing business. Informed decision making is vitally important.
So, what management information should directors and senior management teams focus on a regular basis? Here are a few things we would recommend.
It goes without saying that business leaders need accurate and timely information that is compliant with accounting regulations. Businesses should be preparing their management reports in line with the accruals concept so there isn’t any difference between their management reporting and year end statutory financial statements.
There are key pieces of information that are essential and should be at the fingertips of directors and the leadership team. This will include the profit and loss statements, balance sheet, cash flow forecasts and debtors.
Key performance indicators
Every business will have a fixture of financial and non-financial KPIs. These might include the traditional financial indicators such as value of turnover, gross profit margins, EBIT (Earnings before interest and tax) and cash flow forecasting. They are also likely to include non-financial indicators such as number of complaints, customer satisfaction scores, number of new sales and repeat customers. These are measures that will want to be reviewed regularly.
Cash is king
Every business will know that cash is king, so measures that capture and report on cash cycles is critical. Debtor and creditor reports should be considered essential, driving working capital. Stock levels too will be critical – too little and you run out of items to sell, too much and this takes up valuable working capital.
Any borrowing by a business should also be regularly reviewed together with the ability to meet lending repayments.
Cashflow is often one of the reasons a business can fail, despite being outwardly successful. It is, of course, unlawful for a business to continue to trade if technically insolvent.
In short, I would recommend all businesses at a bare minimum consider the following key weekly reporting measures:
- Cashflow reporting
- Supplier payments
- Employment costs
- Debtor days are bad debts
- Gross margin analysis
How Hillier Hopkins can help
As a firm of Chartered Accountants we have been serving a range businesses across various sectors in their growth and prosperity for more than 80 years across our 3 office locations. If you would like to speak to our expert Gary Wong, call +44 (0)330 024 3200 or email email@example.com and he will be happy to assist.