Create regular management reports

Ensure the accuracy of your financial information

As an entrepreneur, it’s essential to have a clear understanding of your business’s performance at all times. Relying on a “gut feeling” about your operations or sales isn’t enough. You need accurate data and a process to track how your financials fluctuate over time so you can monitor trends and identify potential issues.

1. Hire a Professional Bookkeeper or Accountant
   Having a skilled bookkeeper or accountant is crucial for keeping your accounting system updated with accurate, timely information for every financial transaction. This allows you to focus on managing operations, driving sales, and handling other tasks where your expertise is most valuable.
2. Establish an Accounting System
   After securing professional financial support, the next step is setting up an accounting system that reflects the specific needs of your business. Many systems today come with predefined structures and reports tailored to various business models. Work with your accountant or bookkeeper to choose the software that best fits your company’s requirements.
3. Review Financial Reports Monthly
   Use your accounting system to regularly compare your actual results against the monthly and annual targets you’ve set. Address any variances immediately, whether they stem from accounting errors, unexpected expenses, or revenue shortfalls. Timely record-keeping ensures you don’t need to wait until the end of the month to take corrective action, helping you stay on track.

Why do I need management reports?

Management reporting provides insight into how different parts of your business are performing, giving you valuable data to make informed decisions.

Specifically, management reporting enables you to:

• Track your business performance over time and assess whether you’re meeting your goals.
• Combine operational (non-financial) data with financial results for a comprehensive view.
• Analyze costs in greater detail, helping you adjust spending practices if necessary.
• Understand how your decisions impact gross margins and profitability.
• Plan improvements to enhance performance.
• Predict upcoming results to stay ahead.

Management reports can be generated daily, weekly, or monthly, depending on how quickly you need information. For example, you might track labor utilization daily, monitor overtime expenses weekly, and review overall labor costs monthly. The objective is to have timely data that helps guide decisions to boost your business performance.

Once you have regular management reporting in place, you’ll gain a clear understanding of how your business is doing and can identify areas for improvement.

What is included in my management reports?

1. Financial Statements Reviewing your financial statements helps you compare results over different financial periods and see how you’re performing relative to your forecasts. Key components include:

• Balance sheet: Provides a snapshot of your assets and liabilities.
• Income statement: Shows if sales and profits have increased or decreased compared to the previous period and whether you met budget targets.
• Cash flow statement: Tracks the flow of cash in and out of your business.

2. Operating Reports These reports focus on specific aspects of your business, such as:

• Income by line of business
• Costs of running the business
• Employee costs by function

Like financial statements, you can compare operating reports with your budget or past results.

3. Financial KPIs Financial Key Performance Indicators (KPIs) help you measure ongoing financial health and progress toward your goals. For example, in a trucking company, KPIs might include:

• Cost of fuel
• Driver wages
• Kilometres driven

KPIs can also track activities that will generate future sales, such as the value of pending orders.

4. Non-Financial KPIs Non-financial KPIs assess performance beyond monetary measures. Examples include:

• Customer relationships
• Outstanding orders
• Daily customer inquiries

These KPIs can be monitored by managers responsible for each metric to ensure performance aligns with company objectives.

Unlock the secrets to optimizing your business performance! Continue reading and download the guide to master your company’s financial health.

Related guide: How to Grow Your Revenues: A Guide for Entrepreneurs | BDC

Table of Contents of “Monitoring Your Business Performance: A guide for entrepreneurs”: