Management Reporting for SMEs

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Do You Want to Reduce Costs, Increase Your Revenue and Spend Your time more efficiently?

You may think, why spend the time and money on management reports. The answer is simple: Because you can’t afford not to!

Having a routine management reporting process can support you to increase and protect revenues n a number of ways:

1) It enables the relevant business decisions to be taken at the right time, reducing spend on marketing costs when it’s not driving sale, recruiting new support staff where client churn is increasing or reviewing the quoting process where margins are dropping on client work.

2) It supports a continual process of improvements or actions that allow management to control or improve business performance. For example tighten credit control processes to improve cash management or cash flow conversion rates on new business activity.

3) Particularly where the business is being led or driven by an entrepreneur, it gets finance into the meetings and a business perspective based on process, cost and cash into the decision making process.

4) In a changing or growth environment, “what gets measured gets managed” and core KPI’s can encourage action across the business on key issues to deliver positive financial results.

Is Management Reporting Really Relevant for SMEs?

You may not believe that management reporting can be relevant to your business, but this couldn’t be further from the truth. In fact, management reporting can do wonders for even small businesses and is one of the financial tools that we like to call a “growth accelerator”.

Regular management reporting will enable you to see what is affecting your current performance, as well as give you an idea of how you are doing in comparison with your targets, allowing you to make the right decisions, at the right time and keep one step ahead of competitors.

Which SMEs Can Benefit from Management Reporting?

Management reporting is a core financial tool for any forward thinking SME, particularly businesses with the following characteristics:

• SMEs of a larger size and with a certain level of complexity. For example where this means that it is beyond the ability of one person alone (usually the founder) to manage the business (in their head).

• SMEs with ambitious plans to grow and develop their business within a short period of time.

• SMEs that are already in the middle of a substantial growth phase in their business and therefore need to manage and control the business growth as a matter of urgency.

First Things First: Make sure you keep your records up to date!

To enable a successful management reporting process, you need to make sure you do your day to day bookkeeping accurately. You can read more about the value and importance of bookkeeping here.

Maintaining up to date basic recordkeeping will create the necessary structure for management reporting and ensure at a minimum that:

• You know who owes you money, who you owe money to and what your cash position is.

• Compliance becomes much simpler ahead of every HMRC deadline.

• You fulfil your legal obligation of maintaining adequate books and records for your company.

What does a Management Report Pack look like?

There is no fixed standard template for management reporting as there are no regulatory requirements for what it should contain; however as a minimum we recommend that a management reporting pack should consist of:

– A Profit & Loss, showing current activity (sales, purchases and profit for the month and the year to date).

– A Balance sheet, showing the amounts due from your Customers, due to your suppliers and the cash in the bank etc.

– List of Debtors and Creditors (i.e. outstanding invoices).

– Minutes from each exec meetings (including who is going to action what, ahead of the next meeting)

– New business analysis (i.e. pipeline of potential new clients and projects etc.)

– Budget data, for example targets for turnover per month or for the year as a whole as well as for business costs such as overheads.

– Top Client Data. Identify your largest clients to ensure that you are focused on keeping them, that they are profitable and identifying importance of any risks around size or customer activity.

– CashFlow Report

– KPI Dashboard. Identify what drives your business performance whether it is sales by type, number of new business meetings by sales staff, number of new members, number of active members etc.

Most businesses produce management reports on a monthly basis, although quarterly is not unusual. Obviously the sooner that this information is generated and produced for review, then the sooner the business owner(s) can take decisions and actions to positively affect, control or manage business performance.

What’s Next?

If you have any questions please contact Damian Connolly by email: da****@sa************.uk or call: 0207 952 1230

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