Introduction: Data-Driven Decisions
Management reporting is a company's internal "compass." Unlike financial and tax reporting, which reflect the past and are intended for external users, management reporting serves the company's directors and owners in making current decisions. With increasing competition in Georgia, managing a business on intuition alone is no longer sufficient. Successful companies need accurate, timely, and detailed information about which product is profitable, where excess resources are being spent, and what the cash flow forecast looks like for the coming months. Management reporting is not regulated by law—it is regulated by business needs.
What Does Management Reporting Cover?
This service is individual and tailored to the specifics of a particular business, but the main components include:
- Budgeting and Variance Analysis: Comparing planned and actual figures, identifying reasons for deviations.
- Profitability Analysis: Calculating profit by products, branches, projects, or clients.
- Cash Flow Forecasting: Planning future income and expenses to avoid liquidity problems.
- KPI Dashboards: Visual graphs and tables showing key business indicators (e.g., sales growth, margin, customer retention).
- Cost Accounting: Detailed calculation of cost of goods sold and allocation of indirect costs.
Common Situations and Scenarios
Imagine a retail chain with 10 stores. Overall, the company is profitable, but management reporting shows that 2 stores are operating at a loss and "eating up" the profits of the rest. Without this information, management could not make the right decision to close or reorganize these branches. A second scenario is a cash gap: the company sells a lot on credit, but money is not coming in. A Cash Flow forecast shows in advance that there will be no money to pay salaries next month, allowing the director to seek financing in time. Also, when launching a new product, management accounting accurately calculates its cost and determines the optimal selling price.
Georgian Legal Framework
Management reporting is not strictly regulated by the "Law on Accounting, Reporting and Auditing", as it is an internal document. However, its basis is correct primary accounting, which must comply with legislation. regarding corporate governance, the "Law on Entrepreneurs" obliges directors to act in the best interests of the company, which implies making informed decisions. Consequently, the lack of management accounting can be considered inefficient management.
Process: How is the System Implemented?
The process begins with studying the business—what are the company's main goals and what information does the director need to achieve them. Then specialists define Key Performance Indicators (KPIs). Data sources (accounting software, CRM, Excel) are integrated, and report formats are created. The final stage is establishing a regular cycle: for example, on the 5th of every month, management receives an analysis of the past month. Modern BI (Business Intelligence) tools like Power BI or Tableau are often used for data visualization.
Why Choose a Specialist on Legal.ge?
On Legal.ge, you will find financial managers and analysts (CFO Services) who will help make the numbers "speak." Our specialists do not limit themselves to just calculating taxes; they work as your business partners, providing strategic advice and helping maximize profits. Outsourcing management reporting through Legal.ge is a cost-effective way to get CFO-level competence without paying a full-time salary.
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