Management personnel often faced with a need to be able to action sound decisions at any point in time. Such decisions can be significant therefore stir organisations into new directions or allow organisational change to happen while other decisions might need to be spontaneous and flowing to give instant direction on something on a much smaller scale. The key to achieving the right decisions with a level of comfort is the ability of management to get hold of the relevant information required. This on its own however is not enough to satisfy sound decisions. A very important factor that one needs to consider is time.
Many of us have heard the term ‘time is money’, implying that the quicker something is visible or known, the earlier one can use it to their competitive advantage. The more timely information is available, the more management can pre-empt certain decisions which would have otherwise lead to disruption or failure. Unfortunately there are still limitations within the ‘timeliness’ of information. How early is ‘timely’ for an organisation? How fast are management expected to react to certain matters? Are there enough resources which enable the provision of ‘timely’ management reporting? All these elements determine that timeliness on its own, although having its advantages, might require an additional feature when it comes to the information provided to management. Management Accounts are not only required to be timely, but also consistent.
Consistency provides a certain clarity in the numbers which allows top management to easily pick up slow performance. It also allows them to compare performance to prior periods and assess trends. If the management report is consistent, management can focus on analytics more closely knowing exactly the underlying information producing such analytics and where any change variables are coming from. For example, if the aged debtors analysis is always part of the monthly management report, and for current month the level of debtors has decreased steadily while sales remained consistent, management can conclude, without even working out the debtors’ ratio, that debt is collectible much faster than prior months and cash flow should have improved. It is easier to obtain a generic picture of figures, knowing that the data being presented is consistent.
Timeliness and consistency – both crucial elements contributing to sound decision-making. However, in my opinion, none of this would be possible without having an in-built structure to make sure both elements are achieved in monthly reporting. Such structure entails having a plan of how what to report i.e which management accounts are most relevant to management? It also requires knowing the extent of data provided and in what context. Are we required to report a full set of financial statements every month? Or are a few key Balance Sheet and P&L figures enough? What are the highlights of the agenda on the monthly board meeting when it comes to assessing performance? The finance team needs to address these questions to be able to deliver consistency. This comes from knowing management requirements and what KPI factors are more crucial for management.
Furthermore, a structured finance team is one which plans when to deliver the management report. I believe sticking to a general submission date after month-end helps maintain consistency, especially in the context of a group of companies, where reporting varies in size and nature reflecting various operational entities. However it stands to reason that while the larger-scale more complex companies require more time and detail when it comes to delivery of the management report, the other small non-operational entities are able to deliver this much quicker, due to lower-scale operations.
Last but not least, one cannot look at timely and consistent management reporting without considering the aspect of information systems. The latter have nowadays enabled us to achieve both elements when it comes to reporting, and allowed many companies to move away from manual input or reporting using traditional methods like Excel. The accounting software utilised makes all the difference, since using more modern cloud-based apps may allow some form of flexibility and make it easier to change transactions or fix mistakes. These would also be accessible in a much easier way than using desktop applications and information presented would include a ‘dashboard view’ which every decision-maker would appreciate. Not only is reporting easier using modern applications, but there is also the ability to integrate the finance team to the operational department, even if by simply linking to other operational applications. This not only can achieve consistency in a better way, but if at any point in time, top management would require the level of sales done at any time of the month vis-à-vis the level of debtors, such reporting would be available at the click of a button. Technology has proved to be an important player in management reporting, and these leaves room for finance teams to focus more on the analytical side of a business, rather than spending too much time making the figures ‘look presentable’ for the board.