For businesses aiming to achieve consistent growth year on year, management reporting plays an important role in capturing key metrics required for owners to run effective business operations.
Designed to ensure decisions are made via informed insights, at its core, management reporting provides a guide to allow business leaders to forecast the direction of certain strategies, highlight the internal and external risks attached to growth models, and gain greater clarification to regulate planning.
From a financial perspective, management reports include analysis of Profit & Loss Statement (i.e. profitability), Balance Sheet, Cashflow, Debtor/Creditor management, Key Performance Indicators (operational and employees), business benchmarks, and other commentary (highlighting overall business performance, sales, and review of cash reserves).
These areas combined, assist business owners to understand the position and health of their business, alongside helping to build action plans aligned to the organisation’s overall strategic goals and objectives.
Whilst financial data is a significant component of the reporting, analysis also profiles other core business functions – such as sales & marketing activity, human resources, operations, and general metrics.
Where can Management Reporting assist your business?
The provision of management reporting to support on-going tax obligations provides business owners with a focused update on the organisation’s position attached to a monthly or quarterly timeframe, rather than needing to wait until the end of financial year.
From a compliance perspective, utilising management reporting, leadership teams can gain clarity around business profits and an indication of associated tax liabilities. Building an understanding of these areas, business owners can work with their advisers to determine how best to vary tax instalments – complying with ATO regulations.
Ensuring compliance obligations are maintained, management reporting also allows for clear guidance on lodgment activity surrounding Business Activity Statements, superannuation obligations, payroll tax requirements, and industry specific compliance (such as QBCC compliance).
Furthermore, in comparing against benchmarking conducted by the Australian Tax Office (ATO) and other industry bodies, management reporting can provide a guide to ensure business performance falls within industry parameters determined by the ATO – complying with standard procedures and avoiding potential audit scrutiny.
The Relationship between Management Reporting and Tax Planning
For businesses eager to plan their tax position, management reporting holds a strong relationship with tax planning, providing an overview into past performance and how this may affect tax arrangements throughout a financial year.
In conducting management reporting alongside tax planning, executive teams can project cash inflows and outflows, in addition gaining an understanding of any seasonal volatility of certain business actions. In doing so, businesses can optimise their tax liabilities throughout the year.
Combining both reporting methods can be a powerful tool to assessing tax liabilities – creating tax efficiency, cashflow maximisation, allowing the business to execute growth strategies.
How Management Reporting can better advise Business Strategy
At an advisory level, management reporting can also allow for greater alignment of business strategy – advising the potential strategic direction for a business.
In being presented to business owners/ Board of Directors, management reports can assess the relationship between true revenue achieved against allocated budgets, showcasing why there may be variation between the two and better structuring realigned revenue targets.
With management reporting providing analysis of business performance against industry benchmarks - leadership can potentially identify internal opportunities for improvement. This is essential in comparing a business’ current position against where they hope to be in the future, understanding where actions may achieve growth or where they may be ineffective.
For certain industries (such as building and construction), this review can help determine certain financial reporting requirements – essential for Queensland Building & Construction Commission (QBCC) compliance.
Likewise, this can also be essential in determining employee productivity and client profitability.
Finally, like detailed financial reporting, management reports can be provided to banks and other investors to secure loan or lines of credit or used in understanding the serviceability of finance borrowings. This focus can provide business owners with insights into their income against expenses, and how the business is positioned against various loan covenants.
For More Information
With the increasing importance of management reports to provide business owners with clear and concise insights to support future planning, should you have any questions, please contact the adviser team at Archer Gowland Redshaw.
Should you wish to explore how management reporting can assist your business, contact Ian Walker (Executive Chairman) on (07) 3002 2699 | ianw@agredshaw.com.au.
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