Management Reporting | Functions or Importance of a Report

The need and importance of report is understood by the following ways. In other words, a report do the following functions.

Functions or importance of a report

1. Provides Information: The very purpose of preparing a report is providing information to various levels of management. The term management includes Foreman, Supervisor, Chairman, Department Manager, General Manager and Special Officer. These people are getting information like trend of the business, cash flow and fund flow etc.

2. Helps in Selection: Out of the many information available, only relevant information is included in the report. A report brings many alternatives out of which a management has to choose one profitable alternative.

3. Role in Control System: A target is fixed well in advance in an organization. The management has to see whether the employees are working according to the targets and standards. The reports are prepared in such a way as to measure the actual performance with the budgeted targets. If there is any unfavorable variances, the reasons are find out and remedial or corrective actions are taken by the management. In this way, a report is used as a control tool. A management can control with the help of this tool.

4. Helpful in Profitable Operations: A report highlights the direction of moving the business and the level of operation. On the basis of this type of report, a management can give clear cut instructions as how to increase the profitability to its employees.

5. Follow the Principle of Management by Exception: A management has only a minimum time to exercise control. Hence, the activities, which are not carried out according to planning and budget, are highlighted before the management. This is the way of following the principle of management by exception.

6. Helpful in Achieving Overall Objectives: Report motivates the executives and employees to take necessary steps towards increasing the earnings of the organization significantly. In this way, the management is achieving the maximum profit with the help of reporting system.