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An Outline of Management Reporting: MIS Reports

Ruchi Gandhi

| Updated: Jul 08, 2020 | Category: CFO Service, Financial Reporting

Management Reporting

In every company, the management needs information to arrive at decisions and evaluate the company’s performance in order to effectively run its business. This required information may be made available to the management via reports. Reports can be defined as a means of communicating facts, usually in the written form, that should be brought to the attention of the different levels of management to enable them to take appropriate actions for proper control.

Meaning of Management Reporting

Management Information System (MIS) is essentially a reporting mechanism for monitoring the ‘mission’ of an organization in terms of objectives set out and evolved by the organization with formal planning.

A strong management reporting system is a prerequisite to produce timely and reliable information to make high-quality business decisions about the company’s future. Insight gathered through MIS reporting allows for deeper analysis to understand issues, provides accurate comparisons with competitors, and implements ‘controls’ to hold employees accountable for budgets. It identifies the source of a business problem, so you can begin working towards a solution.

The scope of MIS reports is wide and could range from a variety of data such as financial analysis, employees’ headcount, clients or customers, accounts, products, client assets in custody, investment performance, etc.

Reports are prepared for each executive right from the bottom up to the highest level of management, taking into account their status and responsibilities in the organization. With these reports, they can get timely information on the performance of people working under them as well as for the organization as a whole.

The Need and Importance of Management Reporting

Some of the reasons as to why an enterprise needs an effective management reporting system in place are:

  • A constant need for information to make decisions and evaluate trends
  • Lack of visibility, coupled with the availability of a single holistic picture of the company’s performance
  • Data redundancy and data duplication resulting in data processing and accuracy problems leading to error-prone records
  • Use of high-value resources
  • Reports being unavailable with the right stakeholders at the right time

Management reporting systems help in capturing data that is needed by managers to run an effective business.

An effective management reporting system assists in the following:

  • Provides information to various levels of management and improves decision making
  • Improves management effectiveness
  • Brings several alternatives from which managers must choose one viable alternative
  • Gauges whether the work is being performed according to the targets and predetermined standards
  • Highlights the direction in which a business should move to increase its profitability
  • Improves responsiveness to issues
  • Follows the Principle of Management by Exception, thereby drawing management’s attention to the most concerning activities (from among a plethora of activities), which are not carried out as planned or budgeted
  • Improve the efficiency of resources in the delivery of organizational services

Frequency of Management Reporting

Frequency of Management Reporting

Routine reports are periodically rendered. The intervals at which routine reports are to be submitted should be pre-set for each report. For instance, production reports should be rendered at shorter intervals because delayed production monitoring can result in a continued loss for a longer period of time. Manufacturing losses should be noted as soon as possible so that corrective measures can be taken to eliminate losses.

A few matters may be covered by special reports before they are presented to the management. After investigating the problem which requires a thorough scrutinization, special reports shall be submitted. For instance, special reports may be needed to address the following business problems:

  • The effect of idle capacity on the cost of production of varied products
  • Make or buy decision
  • Problems dealing with research and development expenditure
  • Whether or not to replace labour by machines
  • Cost reduction schemes
  • Efficiencies and inefficiencies of the production department
  • The increasing/ declining trend in sales orders
  • Whether to hire or purchase fixed assets
  • Price fixation of products
  • The effect of labour disputes on production and its cost
  • Report on the effect of a change in the government’s policy
  • Report on the KPIs of Human resources
  • The effect of a high rate of labour turnover
  • Finding the most suitable method of raising funds
  • Finding the most suitable method of investing surplus cash
  • Feasibility study for a new project/venture
  • Report on the company’s financial position and profitability

Forms of presentation of MIS reports

Information may be presented to the management in either verbal (or oral) form or written form. Group meetings, seminars, conferences or interviews can be arranged where the company’s staff from different levels can meet to discuss and exchange ideas.

Nevertheless, the most common form of management reporting is where the data takes the form of a written report.

  • Descriptive reporting:These reports are normally written out in a descriptive style without taking the help of tables and graphs. They may include tables and graphs to emphasize some of the points that have been debated. It is necessary to summarize the main report so that its recipients can know the exceptional issues and the report’s recommendation without going into its details.
  • Tabular reports: These reports are presented in the form of comparative statements and are usually applied in case of periodical representations covering production, costs, sales and finance. These reports should use the same basic type of statements or tables from time to time so that the current and past results can be accurately compared.
  • Graphic presentation: Being the most important method of presenting information to the management, it is a pictorial one and draws the recipient’s attention faster and forcibly. Graphs and diagrams have become very popular lately as they allow comparisons of relatively long periods within a small space. This method of depicting information can accurately represent production costs, variations in inputs and outputs, sales data, finance matters, stock positioning & movement, variances, components of cost of production, etc.

How to develop a successful programme for Management Reporting?

There are several key elements in a successful reporting process for the management. Implementing an effective MIS reporting programme involves the following:

Step 1: Discovery: The first step is to effectively communicate the vision behind this exercise across the organization and to the appropriate stakeholders. Identify and access the available data sources to suit your specific needs.

Step 2: Data accuracy: It should begin with an accurate and healthy data to support core business strategies. Data should support both the long-term and short-term visions of the company and should be trustworthy and from a reliable source. For instance, if data is not deleted for a discontinued product, the remaining data pool and the final reporting information will be negatively skewed.

Step 3: Analysis: Understand the amount of commitment involved in generating each report. Develop definitions of data to ensure that everybody interprets it the same way. Prioritize your information, understand what the data says, and further try to encourage quick decision-making abilities of the recipient.

Step 4: Report creation and delivery: Creating the reports and determining the appropriate method of data delivery is the next step. Pay close attention to the specific needs of your users whilst formatting and reporting.

Step 5: Implementation: Develop each report separately and create a process of governance to ensure data safety across the company. Define the requirements for access control, detailing who should have access rights to the information generated. One can minimize work by leveraging an implemented software to create repeatable processes and automate report jobs for predetermined periods of time.

Step 6: Access point: Build a convenient place to access data for users, such as a web portal or SharePoint platform.

Step 7: Feedback: Collect comments and suggestions from the stakeholders, including the management, to discover ways to continuously improve the processes and to ameliorate any pitfalls in business functions.

Step 8: In-house IT capabilities: Lastly, ensure that the personnel of in-house Information Technology (IT) department can handle the requisite systems and issues if they occur.

General principles of Management Reporting

A good MIS report will help the management to take the requisite actions which are expected to improve the organization’s performance. For making a report that is trustworthy and easily comprehensible, certain general principles need to be followed while reporting.

These are enlisted below:

  • The report should have a suitable title for explaining the subject matter documented. It should be in a good format and must have subheadings and divisions to paragraphs.
  • The report should relate to a certain time period, and the time period should be indicated at the top of the report.
  • The report should be factual, backed by authentic data, clear and concise.
  • The report should be prompt, as delayed information is denied.
  • A report should distinguish between factors that can be controlled and non-controlled and disclose them separately. This is so because the management can take appropriate action with regard to controllable factors.
  • Appropriate comments should be expressed in the report as it will save the valuable time of the management, and will draw prompt attention.
  • The report should be completely correct barring the permissible degree of inaccuracy, as set by the management. The allowable margin of error will depend upon the purpose for which the report is being prepared.
  • The report must draw the attention of the manager to extraordinary matters immediately, so that ‘Management By Exception’ can be efficiently implemented.
  • Visual reporting through graphs, charts and diagrams should be preferred to descriptive reports since visual means is likely to leave a long-lasting impression on the minds of the managers.
  • Detailed analysis for all the results should be given so that a comparison can be made between the actual and the budgeted.
  • The report format should remain unaltered from time to time.

Conclusion

Management reporting systems have traditionally only been used to pull up information. Over the years, though, the system has undergone a tremendous transformation, making it a robust reporting and management platform. It can now provide financial and non-financial information that can assist the management in taking necessary steps to control their business operations.

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Ruchi Gandhi

A CA together with MBA (Fin) and M Com, she relishes taking interest in insightful writing in the domain of taxation and finance. She has gained experience as a full-time author and has also served an accounting role in industry.

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