Top Financial MIS Reports that every Business Owner Should Review
MIS Reports are system-generated reports that summarize the functioning of each department. These MIS reports are normally prepared on monthly basis and are used to assess the performance of various departments in the organization. As a business owner, these reports serve as an almanac for you to give you a complete picture of the financial situation in your organization.
There are different types of MIS Reports based on the nature and size of the company. Some reports provide insights about future plans of action while some highlight the current performance. While other reports can be viewed by the managers of the respective department, there are certain financial MIS reports that every business owner should review. So, here is a list of top financial MIS Reports that you should review as a business owner to keep yourself posted on the happening of your business.
- Sales Report
As a business owner, you should review this critically more than a mere sales figure. This report is provided by your marketing and sales department. This report also contains details such as sales by product line and sales by geography. If your customer concentration is high, you could also instruct your managers to include sales by each customer in the report. Analyzing this would provide you with a better insight into where to focus next while taking business decisions.
This report also contains a comparison of budgeted and actual figures. Being a business owner you should be aware of the reasons for the sales variance from budgeted sales.
- Balance Sheet
This shows what you own and what you owe as a business owner. A balance sheet is a part of the financial statements that is a summary of assets you have like plant & machinery, building, inventory, cash, etc., liabilities you owe like a loan, and your capital invested in the business. This Statement is prepared at the end of the accounting period. This Statement is crucial for your stakeholders, especially creditors. Creditors look at the Balance Sheet of your business to measure creditworthiness.
Through Balance Sheet, you can find out how your business is financed. In the long term, financing through equity is more beneficial than through debt. You can have a discussion with your managers about taking measures to reduce debt in your capital structure.
- Statement of Profit & Loss
As the name suggests, this Statement shows what you have earned during the year. It is also a part of the financial statement that depicts figures for revenue, costs, expenses, profit, and tax. As a business owner, you should review this statement to find out the profitability of the business. This Statement is also something that is reviewed by banks before extending your overdraft facility or cash credit. So, you must understand how money is flowing into your business. If your costs are increasing at the somewhat same pace as your revenue, this shows that you need to work more on reducing your variable costs.
There are two types of costs that you will see in this statement viz. Fixed cost and variable cost. Fixed costs are those that would incur irrespective of your business operations like the rent of the building. Variable costs are those that would incur only if you carry any business operation like selling expenses. So, if your total costs consist of more fixed cost components, then, you may see lower profits or even losses initially. But, once, your profit crosses this break-even, your profit will increase tremendously on increasing sales. So, reducing your variable costs is something that you should have in your mind as a business owner.
Another thing that you should look for in this statement is the amount paid by your company in the form of a penalty, breach of contract, or late fees. This brings a wrong impression on your stakeholders and unnecessarily increases the cost.
- Cash Flow Statement
A Cash Flow Statement is a must review for every business owner. There are many ways in which sales and profits can be manipulated but it is almost impossible to manipulate the Cash flow statement. This Statement shows the actual inflow and outflow of money from your pocket. This Statement is divided into three parts viz. Operating, Investing, and Financing. This report provides valuable insights if you read them in conjunction with the Balance Sheet and Statement of Profit & Loss. For example, If the managers show you that there has been an increase in sales, you can track whether any actual money has flown into the company through this statement.
Also, while reviewing the Statement of Profit & Loss, you would notice many non-cash expenses are merely accounting entries like depreciation and there was no actual cash outflow. The Cash Flow Statement cuts such non-cash expenses and shows the actual cash flow from business operations during the year. One of the very popular ways of business valuation is through estimated future cash flows. So, as a business owner, you should review this statement regularly.
- Production Report
Production Report tells you the data of goods produced by your manufacturing unit. This Report highlights the finished goods produced, the units that are work-in-progress, raw materials used for production, and abnormal losses or defective goods produced if any. As a business owner, you should review this report to find out:
- Whether the target production has been met or not.
- Reasons for abnormal losses
- Whether the machinery has become obsolete
- Variance in budgeted and actual raw materials used
- Variance in budgeted and actual labour costs
You can read this report in conjunction with the sales report to find out whether the units produced are enough to meet the demand. It can also happen that you are manufacturing excess units than the demand which is increasing your inventory costs. If there are more defective goods produced, there is a possibility the machinery needs replacement. If the production time is higher than that of your competitors, then, there may be a possibility that the machinery has become obsolete. This MIS Report can also provide you insight into whether there is any strategic advantage in shifting your manufacturing unit to a different geographical location.
- Account Receivable Aging Report
So, after analyzing sales and production, the very important Financial MIS Report to review is Account Receivable Aging Report. This report shows the sale invoices for which payment has not been received along with outstanding duration. Outstanding receivables unnecessarily block the working capital of your company. So, as a business owner, you can change your credit policies for clients whose payments are overdue for more than 3 months. This Report divides the Account Receivables into five durations such as 1-30 days, 31-60 days, 61-90 days, 91-120 days, and more than 120 days.
You can instruct your managers to stop supplying goods to clients whose bill is overdue for more than 120 days unless they clear the previous dues. Also, you can change the payment terms for such clients like taking advance payment or interest over a certain credit period.
So, these were some important financial MIS Reports that every business owner must review to keep a tab on what is happening with the finances. These MIS Reports help you take better business decisions and help you track where your organization is heading.