The most important tool at the “toolbox” of a managing director is up-to-date reporting. When the managing director has access to the latest, up-to-date information on the business of the company, it is possible to prioritize the time use of the managing director and the organisation to focus on the aspects most important for success.
The task of the managing director is to manage the day-to-day activities of the company, according to instructions and orders issued by the board. According to the Companies Act, it is the responsibility of the managing director to assure that accounting in the company is per law, and financial administration is organised in a reliable way. Therefore, the reporting of the company is an important area of responsibility of the managing director, also from a legal perspective.
A precondition for situation analysis is adequately extensive, effective and up-to-date reporting, which every managing director must compile daily as part of his basic responsibilities. In practice, most of the reports produced in companies describe the history of the company by numbers. This is important, and all data should be profoundly analysed to give value and meaning to the data.
In addition to this, comprehensive reporting includes forecasting, which answers the question: is the company about to achieve the budgeted or forecasted business targets?
- Sales pipeline, the amount, trend and the effect on sales as a whole
- Tenders, the amount, trend and the effect on sales as a whole
- Orders, the amount and trend
- Profit forecast
- Cash flow forecast
By looking at the history and searching for connections between different factors, effective tools for situation analysis can be obtained, such as:
- Rolling 12 month offers / rolling 12 month orders
- Rolling 12 month orders / rolling 12 month turnover
Together with retrospective reporting, forecasts and operational trends provide a solid basis for decision making:
- Is there enough/too much volume?
- Are there enough/too many resources relative to the volume of business?
- Is there enough/too much production capacity relative to the volume of business?
Measuring performance and the degree of success in critical factors is an important part of an effective management system. Key Performance Indicators properly deducted from the company strategy will raise the sectors on which success ensures competitive operation. The indicators give continuously updated information on success relative to the set targets, and point to the factors requiring improvement and development.
Based on the analysis, the needed decisions will be made. Managing director leads the company and its resources, in a way that optimizes competitiveness under all circumstances. Using correct and adequate information, good analysis and guidelines decided by the board, the managing director, together with the rest of the organisation, constructs an operational plan which is used to achieve the desired success.
Besides by managing director carrying out daily tasks, good reporting is needed for example in the work of the board of directors. Basic requirement for value generating board work is a functional reporting system. The board decides on the general guidelines of the business (vision and strategy) and accepts or confirms the budget and business plan presented by management. The actual figures are compared to the budget or forecast, and the managing director proposes (and the board accepts) the actions that should be taken, based on the reporting.
In good management of stakeholder relations, continuous reporting is necessary, together with information sharing with employees, investors, owners, suppliers etc. Especially in times of crisis or change, regular and open reporting helps maintaining confidential relations with stakeholder groups.
Effective reporting is the cornerstone of professional management. If you are interested to hear more, please contact us.