Compliance or Management Reporting?

A struggle in many companies is the investment in resources to meet accounting compliance reporting requirements and the amount of resources left over to provide management with information to manage the company. When companies are small it is difficult to afford staff and time to do both so you know which one - compliance - gets accomplished.

Consequently good information on how the company is performing is not effectively used to manage the business. You would think that over time this would be corrected. However, as the business grows resources to provide management reporting are often sacrificed in favor of more immediate needs - sales, engineering, capital equipment, facilities - to meet growth objectives.

Compliance Reporting comes from the basic accounting practices that record the core operations of the company which are then used to produce the monthly, quarterly, and annual reports along with tax reporting as well. While useful to officially report the company’s top-level performance it does not provide owners and executives with sufficient detail with which to effectively manage the company.

Management Reporting provides much more granularity and detail in accounting information that not only provides greater historical information but also forward-looking information on how the company would perform under different business scenarios. This type of information is model based and supports better decision-making at many levels in the organization.