Question

1. Giving examples, briefly explain two of the following management reports:

1. Analyses
2. Prediction
3. Forecast
4. Optimization report.                                                                                          
5. Exceptional report.

Answer 1

1. Forecast - As the name suggests it is a forecast of financials of an entity. The forecast report predicts how a business will perform in the future keeping the market conditions as constant. It considers the past trends / historical figures to forecast the future. This report is used to estimate the outcome of the company in the future and develop projection with respect to the income, expense, balance sheet, burn outs, head count, etc. The major factor in forecasting is the approach, the factors to be considered. This generally depends on the sector the company is working (example - Retail industry, service indutry, construction, etc) The factors can be head count, sales, market share, competitor analysis, etc. For a company in retail industry keeping the market conditions as constant this is how a forecast report or model will show -

ABC Company Ltd.
	Historical	Forecasted
	2014	2015	2016	2017	2018	2019
Income Statement
Revenue	50,000.00	52,000.00	54,080.00	56,243.20	58,492.93	60,832.65
Less - Cost of Goods Sold	15,000.00	16,640.00	18,387.20	20,247.55	22,227.31	24,333.06
Gross Profit	35,000.00	35,360.00	35,692.80	35,995.65	36,265.62	36,499.59
Indirect Expenses
Marketing	3,600.00	3,952.00	4,164.16	3,937.02	4,386.97	4,501.62
Depreciation	2,500.00	2,080.00	1,622.40	1,124.86	877.39	547.49
Total Expense	6,100.00	6,032.00	5,786.56	5,061.89	5,264.36	5,049.11
Profit Before tax	28,900.00	29,328.00	29,906.24	30,933.76	31,001.25	31,450.48

Above is an income statement. Revenue is forecasted based on the historical growth. The other expense are computed basis percentage of growth to sales. This is a forecast statement of retail industry where in the major driver of forecast is past trends.

2. Exception Report - As the name suggests, this report shows the exception recognised and highlights the areas which is not performing well and is injurious to the health of the entity. In any business there is a budget prepared for different aspects at the start of the year or project. The budgets are prepared factoring all relevant criterias. Periodically the actual expenses incurred or work completed is benchmarked against the budget which was prepared at the start of the project. The item head which has not fared well, or has gone negative or which has shot up much higher than the budget are identified and seperately listed in the exception report. Only negative or adverse finding are reported in the exception report. It helps the management and the decision makers to identify the root cause, to treat or implement new methods or alternatives to curtail the abnormalities. It helps the management to focus on the areas which requires immediate attention and if it remains sunolved it could be detrimental to the organisations health. These exception reports can be generated in all walks of business for example - sales, logistics, customer servicing, inventory managmeent, employee turnover, expenditure (capital and revenue both), Borrowing cost, etc.

Let us consider exception report in customer servicing. Companies having a good product falters when it comes to customer servicing. A delivery manager can avail the use of an exception report which shows the orders which has taken more time than normal time period to deliver to the customer. Such reports extracted daily can help the delivery manager to communicate to the customer in advance and make necessary adjustments. Summary of periodic report when submitted to management can see the quantum of deviations and a necessary additions / updation in the process can be established to curtail the delay in the fullfillment time. Another exception report would be closing customer complaints. By defining customer complaints in various categories and time taken to resolve the issue and resolved by which operator. Anomalies in this process will help to identify the repeated complaints across customers, time taken to solve, efficiency of operator, etc.

Hence an exception report becomes critical to business to analyse what can be imporved to increase the business quality.