Management Accounting Reports

Category: Business & Marketing 70

Are we on track? This is the favourite query of each business lead in the organisation. The business leads commit goals to the external stakeholders for meeting the organisation’s financial goals. Hence they have the responsibility to track and ensure that the various departments in the company are geared in meeting or exceeding the goals. The operational managers work on plans which tie to the overall goals of the company. In order to track the progress against the committed goals business leaders have meetings with their managers who in turn have meetings with their groups. This is exactly where the management accounting reports fit in for leaders and mangers to track and review their short term performance against the long term company goals.

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Content of the reports

The Management accounting reports contain financial and statistical information which are reported to Business Managers on a daily or short term basis. These reports are internally focussed and they provide information either on historic data or a forecast of future plans. These reports are usually prepared on a periodic basis like daily or weekly or monthly to track the progress against plans and also gives justification for variance in plans, if any. They are not in any prescribed format but the level of detail is highly dependent on that required by the recipients of the reports. It helps the Management to review and revise their plans and decisions. Such reports, mostly made by accountants reflect details like:

  1. Sales and revenue forecast: this includes forecast on volumes or sales and dollar value or revenue associated with it.
  2. Budget forecasts and variances: This includes actual cost against the initially planned budget and justification for the variances between the actual cost versus the projected budget.

Recipients of the reports

The Management accounting reports also called Managerial reports are used by line Managers, process and program owners, business leads and supervisors to get a vivid understanding of the operational health and progress of their organisation and a clear picture of the finances. They use this information which is clear, internal to the company and confidential to reset their goals if required It is also evaluated if there is any need to alter the processes to bring about productivity and effectiveness in the system wherever required. In case the teams need support of any form from the higher authorities, this reports justify that too. The data also helps in evaluating the performance of the individuals and departments at a granular level.

Difference between Management and Financial Accounting

While Management accounting reports are required by managers and internal stakeholders, Financial accounting reports are made for external stakeholders. The former does not have any specified format. The degree of detail is usually driven by the requirements based on internal stakeholders. However the financial accounting reports which are means to provide investors and governing bodies , a historic picture of the company’s financial condition have a predefined format. They include Balance sheets, income statements and cash flow statements. While Management accounting reports are usually futuristic, Financial accounting reports are based on historic data.

Summary

There are many good practices followed by organisations to have effective and accurate Management accounting reports. It is the responsibility of the leaders of the company to use these mechanisms to enhance the efficiency and effectiveness of the organisation and thereby meet or exceed their financial goals.

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