Financial and management reports are the fundamental to the success and going concern of a business. For large businesses, various departments have to contribute for these reports to give a true picture of the organizational operations.
However, for small businesses one person might be able to handle the reporting of an organization. While some may think reporting is just about calculating numbers, management reports and financial reports contain a number of differences in content and the generation process. Before hiring a specialist, it is important to understand the differences in the two types of reporting.
Financial reporting refers to the process of providing financial information to company stakeholders in order to influence business goals. The process includes three important components which are the cash flow, the profitability and the value of assets (current and non-current). The finance person tasked with preparing these reports must have an understanding of the variety of statements and the accounting standards required.
The several different types of financial management and reporting are Statement of profit or loss and comprehensive income, Statement of financial position, Accounts that are to be paid (Creditors), Accounts from where funds are coming and Statement of transactions (Debtors). Financial reporting has to be done accurately by a sharp and diligent professional.
On the contrary, management reporting is key to assess a company’s operation and performance. Management accountants send monthly management reports to the CEO.
These inform stakeholders who in turn can better make decisions about the company’s profit points, performance, and tactical steps to benefit the company as a whole. The monthly reports that are sent to the management outline the company’s overall performance in the fiscal year. It is important that management reporting is done by a critical thinker to produce the best results.
Financial reporting includes external reports that require certain standards and guidelines to be followed. They demonstrate the company’s overall performance. Moreover, they facilitate easier comparison between successive financial years.
In contrast, management reporting includes internal reports, including information regarding banks, investors and CEOs. Flexible guidelines. Management reports demonstrate the company’s reports for segments. The way they help business forecasts the company’s future cannot go unmentioned.
In conclusion, it is important to note that management and financial reports are different. However, both are concerned with making a business viable. In order for a business to remain competitive sound financial and management reports are top priority.
