What is the purpose of a performance report?

The purpose of a performance report is to assess the efficiency and effectiveness of operations by comparing actual results to budgeted outcomes. This comparison helps organizations understand how well they are performing against their financial goals and operational targets. Performance reports highlight variances—differences between what was planned and what was actually achieved—which can indicate areas of strength as well as areas that may need improvement. By analyzing these variances, management can make informed decisions to optimize operations, allocate resources more effectively, and implement corrective actions when necessary.

This function is crucial for effective management control and decision-making, as it provides insights into both financial and operational performance, enabling better strategic planning.