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PRESENTATION 12 OUTLINE
The following areas are covered in this presentation:
• Directing the Financial Performance Report
• Non-Financial Objectives Report
• Strategies and Plans are Reviewed and Updated
• Performance Reports
• Implement and Monitor Agreed Improvements
DIRECTING THE FINANCIAL PERFORMANCE REPORT
• Tailoring the report to your intended audience is important.
Common features in all reports however should show the bottom
line i.e. did the company meet its targets and goals? For an
interim report such as a half yearly, is the company on track or
within budget?
• The actual performances of an organisation are reported and used
by management to:
− Monitor performance in relation to the budgets
− Make decisions
− Plan for the future
DIRECTING THE FINANCIAL PERFORMANCE REPORT
• Corrective action in the form of contingency plans or adjustments
to budgets may result from the financial report, so if there are to
be amendments then they need to be clearly stated and directed
to the correct target audience
• All reports, no matter for whom they are intended, must
demonstrate the following properties:
− Accuracy
− Completeness
− Understandable
− Timely
− Forward thinking
DIRECTING THE FINANCIAL PERFORMANCE REPORT• Reports can be periodic, progressive or specific. A periodic report is
written at predetermined times and reflects the performance of the
organisation for a set period.
• A progress report is prepared and the timetable for the completion of
future work is provided. A specific report is produced on request for
a specific purpose
• The internal performance report is a management tool used for
planning and controlling. This is prepared at set intervals determined
by management. The timing of these reports is important if they are
going to serve the purpose they were written for.
• The recipients of reports are the members of staff who hold positions
of responsibility and who will be expected to take any remedial
action required.
DIRECTING THE FINANCIAL PERFORMANCE REPORT• Qualitative factors also an important role in the planning process of an
organisation. It can be difficult to measure qualitative factors as these
factors include such things as quality standards, customer service, and
market share.
• The budgets and financial plans contain all the details of the planned
allocation of the resources of the organisation. The information gathered
on the financial performance of the organisation is analysed and reported
in appropriate language in order for any necessary remedial action to be
taken.
• The data collected, on which the reports are based, needs to be accurate.
For this to happen, the financial records need to be adequately
maintained.
• An internal audit forms part of the internal control process, and is
undertaken to check the processes and record keeping highlighting any
areas of concern.
DIRECTING THE FINANCIAL PERFORMANCE REPORT
• All source documents should be checked for validity according to
the approval and authorisation processes in the organisation.
• One way that the effectiveness of the financial management
process can be measured is by using a technique called
benchmarking.
• Benchmarking can also be undertaken by comparing performance
with that of other like businesses, although it can sometimes be
difficult to gather the information on external competitors.Benchmarking is where an organisation will compare similar internal
operations, identify the department with the best performance standard and then subsequently apply that standard to other inefficient departments.
NON-FINANCIAL OBJECTIVES REPORT
Apart from financial reporting, there are other aspects of a
company’s performance that should be reported. These are called the
non financial objectives and would include the following:
Lost time due to injuries report
Employee turnover and absence
Environmental aspects Compliance with legislative “overheads”
NON-FINANCIAL OBJECTIVES REPORT
• These objectives are important considerations in the performance
reporting for companies
• Non-financial objectives often cannot be directly measured
• Therefore, the targets that are set for indirect items should reflect
the situation. For example, if a business receives complaints from
10% of the customers that receive a particular service, the
business should focus on altering how the service is provided.
• In addition, complaints should be categorised in order to split
those that are minor, easily altered issues and those more serious.
STRATEGIES AND PLANS ARE REVIEWED AND UPDATED
• The accuracy of data collection and collation has been
demonstrated and any shortcomings in this area will negatively
impact the performance reports and lead to an inaccurate budget.
• A lot of the information you need to prepare your budget and
plans is unfortunately speculative and future-based, so any and all
information that can lead to more accurate predictions will lead to
a better budget.
• Reviewing the performance reports for variances should indicate
whether the assumptions and estimations used the previous year
were wrong or based on poor data. Now is the chance to correct
these past errors and optimise performance for next year.
STRATEGIES AND PLANS ARE REVIEWED AND UPDATED
• Variance analysis will only show the variances but also must be
backed up with expert analysis of why they occurred in the first
place.
• Unfortunately, while budgets present a plan for the coming year
they remain fairly dependant on assumption, past and old data,
hopeful estimations, best guesses and the like.
• The use of contingency plans to combat negative, potentially
nasty risks from having a major impact on the business is still a
retroactive step. Retroactive steps are taken in response to or
after the event. Proactive is taken before it happens i.e. the state
of being prepared.
STRATEGIES AND PLANS ARE REVIEWED AND UPDATED
• Do not be afraid of changing the expected outcomes of the
budget. That is why analysis and reporting is done. Budgets are
based on past performance and future expectations and the
accuracy can only be checked by the results.
• The best you can do is to keep accurate records, enter accurate
data, constantly review, be realistic with estimations of variable
costs and sales revenue and try to learn from the mistakes of the
past.
STRATEGIES AND PLANS ARE REVIEWED AND UPDATED
Strategies for optimisation
• There are many suggested strategies for optimising performance
and they can vary according to achievability and can include:
− Decreasing expenses by 10% by end of 20XX
− Reducing staff turnover by 20% by 20XX
− Introducing a new product(s) into the market by May 20XX
− Improve unit sales by 500 units per year on a particular
product by 20XX
The strategy you select may be a combination of various actions and
should be implemented as per company procedures and practices via
the use of a well-constructed implementation plan.
PERFORMANCE REPORTS
• Once financial management processes have been established, it is
important to review them and understand that modifications often
need to be made. Additional information or reports may be
necessary for operations to become more efficient.
• Performance reports - actual performances of an organisation
are reported and used by management to:
− Monitor performance in relation to the budgets
− Make decisions
− Plan for the future
• A high quality performance report provides detailed, concise and
complete information in order to help management in their
decision making.
PERFORMANCE REPORTS
• The report should be:
Reports can be:
• Periodic - written at predetermined times and reflects the
performance of the organisation for a set period
• Progressive - prepared and the timetable for completion of future
work provided
• Specific - produced on request for a specific purpose
Complete Accurate
Authentic Understandable
Timely
PERFORMANCE REPORTS
• An internal performance report is a management tool used for
planning and controlling. This is prepared at set intervals
determined by management. The timing of these reports is
important if they are to serve the purpose they were written for.
• The recipients of reports are the members of staff who hold
positions of responsibility and who will be expected to take any
remedial action required
• Organisational plans are not limited to items where dollars and
cents are involved; qualitative factors also play an important role
in the planning process of an organisation.
• It can be difficult to measure qualitative factors as these factors
include such things as quality standards, customer service, and
market share.
PERFORMANCE REPORTS
Report deficiencies can include:
Content
• DO NOT do these in your reporting:
− Omit relevant and important information
− Include irrelevant or unnecessary information
− The format is wrong
− Misleading report titles and inappropriate subheadings
− Duplicated information
PERFORMANCE REPORTSTiming and Distribution
• The reports may need modifying if the content is not valuable at the
time the report was generated; or if valuable information was omitted
from the report.
• Additional information requirements can arise from a change in work
practices, a change in the day-to-day operations, and a change in the
use of technology or indeed from a change in the market the
organisation operates in. The needs of the users of the reports may also
change over time if the environment in which they operate changes. It
could be that the only modification required is the format of the report
in order to standardise the reports across the organisation.
• Timing of reports is critical, as they need to provide the required
information in time to ensure that any remedial action taken can be put
into place before anything changes
PERFORMANCE REPORTS
Timing and Distribution
• The distribution of reports is also an important part of the process;
it is futile to distribute accurate and timely reports to the members
of staff who do not use the information to make changes
• Accurate information and regular performance reports is an
important management tool to ensure the efficient and effective
running of the organisation.
• Any improvements that are recommended need to be
implemented in line with the financial objectives of the
organisation. They also need to be monitored and reviewed for
their success or failure.
IMPLEMENT AND MONITOR AGREED IMPROVEMENTS
• You have gathered all the data and information from your business
operations and decisions need to be made in relation to the
direction and actions to be taken.
Example:
If your business team determines that sales need to increase to improve the inflow of cash for the business, strategies need to be developed to make sure that could happen. It might be that there needs to be a greater investment in advertising or promotion. Maybe it is more cost effective to use social media to promote the company and its products, there may need to be an investment in human resources, is the right person already on staff?
IMPLEMENT AND MONITOR AGREED IMPROVEMENTS
• Once the direction has been defined and confirmed, who needs to
be involved? When will the new processes or measurements need
to be implemented by? Does everyone involved know what is
expected?
• Any improvements recommended need to be implemented in line
with financial objectives of the organisation and monitored and
reviewed for their success or failure.
• An internal audit forms part of the internal control process, and is
undertaken to check the processes and record keeping
highlighting any areas of concern.
IMPLEMENT AND MONITOR AGREED IMPROVEMENTS
There are several reasons to conduct internal audits:
• Confirm procedures are in place to run a business to maximise
profit
• Quality and effectiveness of the accounting system
• Administrative internal controls
• Verify compliance with all applicable regulatory agencies –
including compliance by staff not just processes are there checks
in place?
• Protect all business stakeholders from risk of fraud
IMPLEMENT AND MONITOR AGREED IMPROVEMENTS
• All businesses, public or private need audits to protect financial
security on a regular basis.
• It is recommended that internal and external audits are conducted
by impartial groups qualified to assess the health of the business,
twice a year is advised.
• Each organisation is different however, do your own research as to
the most appropriate time frame for auditing.
• When will your business monitor progress? Who needs to be
involved?
• It is not enough to decide on a new approach, measurements and
responsibilities must be clearly defined and communicated to all
stakeholders.
IMPLEMENT AND MONITOR AGREED IMPROVEMENTS
• New budgets or initiatives need to follow the same procedure we
started the process with.
PLAN• Identify budgets that need to be implemented
by the organisation• Set targets and goals
DEVELOP• Which people in the organisation need to be
involved developing budgets
IMPLEMENT • Communicate the budget to relevant
stakeholders
MONITOR • Look at budget vs. actual results• Draw on contingency plans if needed to correct
variances
EVALUATE/ CONTROL• Report on outcomes to use for future
improvements• Continual improvement and evaluation