A management reporting system is a part of a management control system that provides business information. This information can be in the form of reports and/or statements. The system is designed to assist members of the management by providing timely pertinent information.
Why do we need an effective management reporting system?
Management reporting systems help in capturing data that is needed by managers to run an effective business. Data could range from financial data, employee headcount, client, accounts, products, client assets in custody, investment performance, etc. The scope of a management reporting system is wide. However, here are the six reasons why an enterprise needs an effective management reporting system:
- Constant need of reports for decision making and analysis of trends
- Reports being unavailable with the right stakeholders at the right time
- Lack of visibility and a single holistic view of the enterprise performance
- Data redundancy, duplication of data leading to data management and quality issues leading to error prone reports
- High value resources
- Changing a global report to fit local needs
- Improve decision making
- Improves management effectiveness
- Improves responsiveness to issues
- Improve efficiency of resources in the delivery of organizational services
Traditionally, MR systems were only used to pull up information. However, the system has undergone tremendous transformation over the years, making it a robust platform for reporting and management. Due to the advancement in technology, it can now provide financial and non-financial information, which can help management take the necessary action to control their business activity.
Traditional bookkeeping activities can now be automated, thanks to the advancement in IT. The system plays a greater role in helping management take good business decisions. It helps in:
- Identifying the problem
- Evaluate alternate solutions
- Implement the best solution
- Review implementation
Five essentials of an effective management reporting system
A MR system should be able to generate good reports: They should be generated in a timely manner, should have the proper flow of information, and should be in the correct format.
- The system should be flexible enough to adjust to all the requirements that are made by the user. It should also provide insights if deviations from predefined standards or estimates occur. It should do all these while being economical to the organization. Localization of reports helps in keeping them simple. Enterprises should concentrate more on localizing their MR systems, as it simplifies reporting. This helps in taking better decisions for each area or domain.
- A MR system is expected to be accurate. There shouldn’t be any discrepancies in terms of reporting. These systems evaluate a company’s result at any given point in time, hence they need to be accurate. The reports that are generated by the systems will be used by senior management, more so C level executives – therefore the need for accuracy is high!
- A management reporting system is only effective when it promptly generates reports. If it doesn’t produce reports when needed, there is no point of having a management reporting system. With the technology that is available, enterprises can obtain information faster and more often.
- A crucial factor for any management reporting system is for it to be cost effective. Reports from this system should never be too difficult to assemble. Also, they should be able to justify their costs. Being cost effective can be the deciding factor for enterprises to opt for a MR system.
- Ultimately, reports that are generated from the system should help the management take informed decisions. Meaning, the reports should be detailed enough to let management know where the next change should be.
- There will be a constant need among executives to obtain the newest information in the most detailed and convenient way possible. Thereby, based on the ever-changing parameters, new reports should be proactively created or the necessary changes must be done to the existing reports itself.
- Also, an automated delivery of reports (both static and dynamic) based on the organizational hierarchy levels is a critical contributing factor for the success of a MR system.
- Finally, an effective management reporting system should maintain a high-level of consistency in terms of the reports’ look and feel and the technology, tools and processes used for all reports.
Effective Management Reporting Systems require skill to develop and implement. Correct KPIs should be identified and measured; the structure, format, and content of the reports discussed to ease decision making. As the reporting system requires experience and time to set up and maintain, it is recommended that enterprises consult dedicated professionals to fulfil the role.