Management Reporting: Intelligence instead of blind spots
Managing companies from a better perspective
Sound familiar? For days on end, you have been entering figures in Excel sheets, adjusting formulae, checking results, and finally generating the charts. Yet the answers that your report is intended to deliver go on to produce one thing above all else: new questions. You get that vague sense that you’re missing the key points again and again.
Not only is such an experience infuriating, but it also has repercussions throughout the company. How is the management supposed to spot challenges, come up with solutions and make decisions if all it can do is rummage around in a more or less nebulous mass of information?
In the face of volatile, complex and rapidly changing market conditions, uncertainty over the state of the business can prove to be especially critical. Long lead times are not what is required, but the ability to act at short notice. Holding one’s own in the competitive environment takes agility.
But why do management reports miss the point? What approaches lead to success? And how can you tell whether critical information has been hidden behind blind spots?
Standard KPIs make reports less informative
Standard values offer guidance and enable new projects to be implemented fast. The same applies to reports. But which values stand for profitability, liquidity and stability? And which KPIs (key performance indicators) provide enough information for the management to make robust decisions?
By observing standard values, information can only be gained up to a point. Experts recommend selecting the key performance indicators according to the business model and the individual profile of the company and using operational as well as strategic key performance indicators. This is because aspects such as profitability should be measured differently for a start-up than for an established supplier.
Budget-actual comparisons essential for agility
Basic KPIs show how the objectives for the future are changing. Thus, after a weak quarter, the expectations for the following quarters will increase. However, for a speedy intervention and for defining measures in the short term, this information lacks the required precision.
Only by comparing the plan for past periods with the corresponding actual figures can the need for action be pinpointed: was there an increase in expenditure, or a fall in sales? In which region, through which distribution channel, or in which product group?
If budget-actual comparisons are made at frequent intervals, rapid and targeted action can be taken – and the trend reversed before minor variances lead to major losses.
Reports with a future
Reports can only record the past. Nevertheless, the figures should enable the management to shape the future. That’s why the choice of key performance indicators for management reporting should be made with the desired objective in mind.
The corporate strategy can therefore be used as the reference for choosing the key performance indicators. By measuring what is of relevance to the company’s strategy, the management report combines looking back with looking ahead.
Planning needs up-to-date figures
Businesses operate in unstable conditions, as new competitors, new technologies or new laws bring changes to their environment. Gathering data from across the entire company and processing it in manual steps is not only hard work, but it also slows down businesses and their reactions.
A modern management reporting system therefore has direct access to the business applications and delivers up-to-date reports in a matter of seconds.
The bottom line
Out-of-date figures, irrelevant key performance indicators, and excessively narrow perspectives all create blind spots. A well-thought-out, customised management reporting system, on the other hand, enables businesses to respond quickly, to identify and anticipate risks and opportunities, and to act with intelligence.