For effective business management availability of management reporting is required! Implementation of effective management reporting — step in a business organization that helps raise income through coordinated work of all its units and accelerate decision-making at all levels.
Management reporting — is result of collection and systematization financial and non-financial information (including natural indicators, time of payments, etc.). The analysis of this information allows managers to make decisions for achievement purposes in business. The purposes and an area of responsibility, define the system data, which is needed for managers to run the business.
Table 1. Reporting indicators for the General director
|Financial reporting. It is provided by the Finance director, monthly. Changes in indicators shall be commented by the Finance director.|
|EBITDA (net profit before the deduction of interest expenses, taxes, depreciation, and amortization.)||It shows the income from operating activities that can be used to evaluate a company’s profitability, for development and maintenance current level of the company. EBITDA decrease, anti-crisis measures should be taken. A negative EBITDA indicates that a business has fundamental problems, a signal of crisis in company.|
|Total Debt Service Ratio – TDS (this ratio shows the proportion of gross income that is already spent on housing-related and other similar payments.)||The indicator should be greater than 1. Thus, the less stable are the income, the above coverage it requires. The indicators of the scale can be: for more sustainable production values of 1.1-1.2; for project business with unstable cash flow is desirable to maintain a cover 2.|
|Short-Term Liquidity. (The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.)||Indicators less than 1 are a cause for careful study of the situation and tightening control of the budget.|
|Inventory Turnover, in days (ratio of average inventory-to-sales)||It is studied, first of all, in trade. Growth of an indicator requires situation discussion with policy of purchases|
|Management reporting. It is provided by heads of the corresponding lines of business, monthly. Indicators of profitability are represented by the finance director.|
|Sales Volume||Items are grouped into broad categories — 3-10 pcs. Monitoring and analysis of the state of change by sales managers in each category, if this change was greater than normal fluctuations in volume.|
|Cost structure||Costs are grouped in types (purchase of materials, goods, rent, salary, taxes, etc.). Request of explanations, in case of difference in indicators of cost items from the regular.|
|Net income (what remains after subtracting all the costs from a company’s revenues.)||Necessary to determine the target level of profit for the company, to compare current indicators with measures for the same period of last year.|
|Return On Assets – ROA (An indicator of how profitable a company is relative to its total assets.)||Shows the overall efficiency of the assets of the company and the company’s ability to provide service to its assets. Values below 10% for small companies and below 5% for large indicate problems.|
|Accounting reporting. CFO is represented it quarterly. Each indicator is accompanied by a similar index calculated on the financial or management reporting.|
|Accounts receivable||The request for clarification in case of a amount deviation in the financial (management) reporting CFO and — if necessary, remediation of data in accounting.|
|The debt-to-equity ratio (D/E)||For production enterprises and service trade companies this indicator should be more than 1. In trade the indicator can be less than 1, but the lower it is, the less is stability of the company.|
- production cost value of products or services (by types or by orders depending on specifics of production);
- dynamics and work in progress structure;
- production volumes by types and / or orders (physical indicators);
- volumes of produced products entering finished goods warehouse;
- dynamics and structure of stocks, raw materials and components.
- sales pattern by products types, on clients, payment due dates;
- dynamics of real shipment of goods;
- dynamics and structure of product inventories on finished goods warehouse;
- costs for sales of products and its delivery to the consumer;
- entering plan of made products for finished goods warehouse on days, weeks;
- dynamics and accounts receivables structure on sold products.
- cash budget disbursement, including debit and credit;
- unit costs for conducting business;
- value and structure of cost price of produced products or services;
- profit and loss statement;
- dynamics of receivables and payables.
- Determination the list of consolidated data according to daily, weekly and monthly information for each level of management, shareholders, investors.
- Determination by financial and economic service opportunities of the accounting automated system, algorithm of information entering for necessary data receiving.
- Ratio, proceeding from a certain list and structure of data necessary for reports, on specific work clusters, who and based on what documents can enter them.
- Determination of commercial product groups or services at cost – produced and total. The analysis of distribution on a chosen groups of different types of costs (determination the principles of cost price calculation).
- Determination when, in what terms the plan (budget) for all massifs of indicators chosen for management accounting will be constituted and be specified and in what terms will be submitted the report on the same structure.
- Determination of the settlement indicators received as a result of management information collection, used for the analysis of activities of the executor.
- Determination of the optimum automated system of accounting for conducting management accounting.
- Formalize by internal orders management information collection and processing by officials, in terms and based on certain documents, on the access levels. Assess risks in this, since virtually all amount of information is a trade secret of the entity.
The management reporting – the instrument of internal control and a financial and economic assessment of the company activities.
Balance Sheet Management shows company cost on a reporting date.