Accurate management reporting is essential for any business as it plays a bigger part in the decision-making process, gives you greater insight into your company's performance, allows you to identify problems, discover opportunities for improvement, and track future progress.

Management reporting is usually done every month right after the financial accounts are closed. In my experience working with CFOs, Finance Directors, and Financial Controllers of various businesses, I have learnt that the most important thing is to know the tasks you need to perform to do effective month-end reporting and then streamline them using a robust management reporting tool.

To help you determine if your financial reporting tool has a problem, start by answering these questions:

• Does your current tool capture historical financial accounts and KPI data over time on a month-by-month basis for at least the last two years?
• Can it integrate your company's financial accounts with the management accounts?
• Does it provide user-friendly forecast input workspaces for each business function (Sales, Finance, Operations) with supporting historical data?
• Does it allow you to prepare tailormade granular bottom-up forecast workings based on your business KPIs and not just some basic logic like growth over last year's sales?
• Is the tool flexible for future changes as your business expands or changes with market events?
• Does it notify you of any covenant breach or meeting of targets you wanted to track closely?
• Can it produce automated dynamic report packs for board meetings?
• Does it simplify and speed-up the reporting process by automating simple day-to-day manual tasks?
• Can you use it to prepare for your upcoming corporate fundraise?

Answering "no" to one or more of these questions indicates that work is needed to shore up your reporting processes. I have put together a list of the top nine capabilities your Management reporting tool must-have for effective and efficient month-end reporting.

1. Track historical financial performance.
   Every business sets future targets through annual budgets, 3year plan, 5year plan. However, there is no use in doing these exercises if you do not track your actual performance against the set targets. This is one of the pain points for most finance teams as they struggle to put in place a robust and streamlined process of recording historical results (actuals) and comparing them against set targets. 
   The most reliable source of actual data is trial balance (TB), as it captures every transaction of the business and ensures double entry. To be able to capture TB data on month by month basis under the timeline and translating it into profit & loss, balance sheet, and cash flows can give great insight into your company's past performance, and most importantly, it can act as the basis for making prudent short to long term business forecasts and setting up of annual budgets.
2. Compare historical performance against budget and re-forecast.
   Management begins with measurement. Comparing actual results against set targets is essential for every business on the planet. As the famous saying goes, "If you can't measure it, you can't control it." Management is a continuous process that requires discipline, and therefore, you should include management reporting as part of your month-end closing process. 
   On every month-end, close your accounts, pull the latest trial balance, update last month's actual, and convert them to management accounts. Bring in your 12 monthly budget, create variance reports, write comments, and publish your board pack. This discipline will add massive value to your reporting process and decision-making.
3. Reforecast continuously.
   Reforecasting is a vital part of the budgeting and planning process. Reforecasting gives you the ability to modify your projected revenues, expenses, and overall expected bottom line based on incoming actuals, which is key to adjusting for continually changing business events.  If you do not reforecast, you risk missing the true picture and potentially your bottom line.
   Forecasting is critical and one of the most challenging tasks for any business as it requires continuous review, update and upgrade triggered by business, economic, country, and global events. Forecasting methodology varies within companies in the same industry. It is very much tailored and aligned with the strategic plans of your business.
   As part of the monthly process, you must review, update, and upgrade your forecasting in view of the latest actuals. This approach keeps you on track with the events that led to deviation from the budget, keeps the forecasts more realistic for the remaining year, and allows you to make better decisions during the year.
4. Simplify and Automate the manual processes.
   Publishing management reports to the board on time is a struggle for the majority of finance teams. Therefore, it is essential to find a robust tool that can safely and efficiently; bring in the accounting data, validate it, map it to management reporting detail, integrate actuals and forecast without overwriting the old forecast, help in the review of business projections in the light of actuals, and finally produce board packs for reporting.
   Automation should simplify boring day-to-day manual tasks such as validating the data, moving data from one file to another or within the model. While automation can save us time and effort, it can also cause problems if it is overused – "Excess of everything is bad." Therefore, trying to automate everything can cost you loss of transparency, making it impossible for a new user to understand and rely on the tool's outputs.
5. Monitor the accuracy of your revised forecast.
   Business performance is usually tracked against budgets, but any reforecasts done later in the year are lost as soon as the historical data is updated. Missing previous forecasts can be a problem as you can never find out the accuracy of revised forecasts made during the year.
   Therefore, to have the ability to retain a copy of every reforecast done over a period of time and comparing it against the actual performance is a must as it can help you and your team monitor and improve on the quality of forecasts produced over time.
6. Improve your reports and charts visualisation.
   Publishing reports is the last but the most vital step in the management reporting process. Clumsy reports and charts always make data comprehension difficult for the audience. Being able to visualise data and tell stories with it is key to turning it into information that can be used to drive better decision-making.
   Your reports and charts should look elegant and professional using appropriate colours, borders, fonts, and types of charts to make your outputs stand out and attract your audience's attention to the desired information. Additionally, your reports should include one pager business snapshot summaries for the management and dynamic financial and KPI reports with the ability to analysis variances (between actuals and different versions of budgets and forecasts).
7. Notify when limits are breached.
   The Senior management of any business closely monitors key metrics such as cash balance, sales growth, profitability margins, bank covenants, and many more. The reporting tool should have the ability to set target limits and notify the users when the limits are breached or targets are met.
   Notifications can be classified into two broad categories; 1) "Alerts" to notify any breaches like bank DSCR ratio going below the threshold, and 2) "Errors" to report more severe problems like negative cash balance, which needs immediate attention. With the use of checks and alerts, you will always be on top of key metrics and technical issues that may arise due to inappropriate forecast assumptions.
8. Prepare for corporate fundraise.
   Fundraising has become very common for modern-day businesses. Before you approach the investors for the fundraise, you must have; three-to-five-year business plan, target equity funding, entry and exit investor valuation optimised for multiple scenarios showing the investor returns.
   Using the same fundraising tool will give you a massive advantage as it will help before and after the fundraising stage. Before fundraising, you can use it to create your pitch deck, and after securing the funds, you can use it for reporting to investors. Additionally, you will have granular detail in your tool to answer investor queries asked during the presentations.
9. Flexibility to change with growing business requirements
   It is said that change is the only constant in life, and the same can be assumed for business as well. With the growth in business, comes a need to flex the forecasting and reporting ability of the tool in use. These requirements could be anything from adding a new revolver facility to amending the forecasting logic or creating new reporting lines.
   A good reporting tool should be capable of incorporating regular changes and upgrades in the business. On top of that, it should be transparent and allow users to audit the workings when needed.

Conclusion.

The nine capabilities we discussed will help you in assessing the right tool for your business. I am sure there can be other additional requirements for some companies, and therefore we believe that there can be no one software or solution that fits every business.

Here at FAB Analytics, we design, build, operate, and maintain tailormade forecasting and reporting tools in Microsoft Excel and Power BI. We add immense value with our ongoing support as you get access to a team of professionally trained modellers who work to a common best practice standard called FAST. Our services are cost-effective compared to you setting up your in-house team.

We endeavour to develop a solution that accurately reflects your desired reporting requirements, and it can be used for managing day-to-day operations. We take full ownership of the new tool, right from development to running it and making any upgrades to reflect changing business requirements in the future.