Page 270 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 14: Management Reporting and MIS

Notes
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Caution Performance reports should be standardised. Executive becomes accustomed to
certain terminology, forms and methods of presentation and know where to look to fi nd
the specific information. Despite the desirability of standardising performance reports,

constant attention must be given to improving them. Improvement necessarily involved
changes, but desirable changes, if made at an opportune time and adequately presented, can
be accomplished usually with a minimum of confusion. Reports must be kept relevant.
6. Prepared and presented promptly: Consistent with the cost of detailed record-keeping
and reporting, performance reports should be available on a timely basis. To achieve a
realistic balance between immediate reporting and the costs of detailed reporting, monthly
performance reports are widely used by industry. When special problem areas are involved,
weekly and even daily reporting may be necessary, at least for a time.
7. Effective management follow-up procedures: Follow-up procedures constitute a key aspect
of effective control. Some companies require written explanations of signifi cant variances.
The follow-up procedures preferred by other companies involve constructive conferences
where the causes are discussed and corrective action is decided upon. Follow-up procedures
should begin at the management level in the executive committee meeting, for example,
where both unsatisfactory and satisfactory conditions are discussed and analyzed. Decisions
should be made concerning ways and means of correcting unsatisfactory conditions.
Favourable variances should be accorded equivalent study, (1) to determine whether the
goals were realistic, (2) to give recognition to those responsible for high performances,
(3) possibly to transfer some “know-how” to other subdivisions of the company.
Group and individual conference should be held at the various management levels for
effective correction action. Follow-up procedures should embody constructive action to
correct unfavourable conditions rather than punitive action for failures, the results of
which obviously cannot be erased. Another important aspect of follow-up procedure is
that the resulting action is strictly a line responsibility rather than a staff responsibility. The
budget director, controller or other staff officer should not undertake, nor be assigned, the

responsibility of enforcing the budget.

Example: A comprehensive performance report for Production Department X in S
Company is shown below, from which following features are worth noting:

1. Identification of responsibility
2. Distinction between controllable and non-controllable items

3. Specific time dimensions – month and cumulative to date
4. Method of reporting variances
5. Adjustment of the (planned) amounts to actual output (that is fl exible/variable
budget approach).
6. Detail on each category (including service usage in units) and
7. Explanatory comments and suggestions.

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