Management accounts will arm you with the information needed to drive your business forward and steer it in the right direction.
What are management accounts?
Financial statements (at a most basic level a profit & loss account and balance sheet) prepared periodically e.g. monthly or quarterly. They will provide you with timely, meaningful financial information in a visual format to help make it easier for you to make decisions with confidence.
Management accounts provide you with a true reflection of how your business is performing and identify areas that can be improved.
The key benefits to you
- Identify risks to the business: for instance liquidity problems
- Cost control: overheads will only be effectively controlled if they are regularly monitored
- Informed decision making: for instance do we have sufficient funds in place to meet the working capital requirements of growing the business.
- Best practice: financial institutions look favourably on businesses with up to date information as it demonstrates a good level of control from business owners.
What should be included in the management accounts pack?
- Profit and Loss Accounts – For the period and year-to-date.
- Balance Sheet – To show your current financial position.
- Key Performance Indicators Report – highlight the key drivers of the financial performance of your business using charts and graphics to make the metrics easy to understand.
- Customised Reporting – Tailored reports to your specific needs for example cost analysis, ‘what if’ scenarios, breakdown for branches or divisions.
- Advice & Recommendations -Practical advice and recommendations presented to you in a short report. Your financial controller or accountant should take the time to go through the report with you and explain where the business is performing well, where it is performing poorly and why.
With the right accountancy software, customised reporting and training, your in-house financial controller or bookkeeper should be able to produce your management accounts. Alternatively, speak to your accountant.
Good record keeping is essential. Ensure all books and records are kept up-to-date e.g. bank reconciliations, invoicing, debtor and creditor lists, journals for wages etc.