Both financial reporting and management reporting play an important role in public as well as privately held companies.
Need a refresher on the major differences? Here’s a quick breakdown, including how companies use the deliverables of both, together, to drive improved performance.
Differences in Audiences, Content, and Frequency
Financial reporting is focused on the disclosure of financial results and related information to internal and external stakeholders about how a company is performing over a specific period of time. Financial reports are usually issued on a quarterly and annual basis.
Management reporting, on the other hand, includes financial and operational information that is disclosed only to internal management to be used to make decisions within the company. Management reporting is typically done monthly or more frequently, depending on the industry and organization.
Differences in Guidelines and Formats
Financial reporting is performed according to generally accepted accounting standards, such as US GAAP. The typical financial statements for a business include the balance sheet, income statement, statement of changes in equity, and cash flow statement.
Conversely, management reporting is not required to be performed in accordance with accounting guidelines and can include a variety of reports and delivery mechanisms. This may include the following:
- Divisional or product-line profit and loss statements
- Cost center manager reports
- Actual vs. budget variance reports
- Product or customer profitability reports
- KPI reporting
- Management dashboards and scorecards
How Both Types of Reporting Help Improve Performance
Both private and publicly held corporations typically prepare a package of information for their boards of directors meetings. These “board books” include financial statements and other operational information about the business. This additional information can be in the form of charts, graphs, tables, and textual commentary.
All of this information is designed to help managers, executives, and board members make decisions that impact the future performance of the organization. This can include mergers and acquisitions, hiring, allocating resources, investing in new ventures, or downsizing and divesting businesses as needed.
To learn more, register for the webinar titled "Transforming the Final Mile of Finance,"