Management Accounts

What are Management Accounts?

Management Accounts are financial statements prepared on a regular basis, typically monthly or quarterly, to give business owners and managers an up-to-date overview of the company’s financial performance. The most common form of Management Accounts include the income statement, balance sheet and cash-flow statement. These reports can be used to track and control costs, benchmark against competitors, make investment decisions and track progress against business goals.

There are many different types of stakeholders who can benefit from Management Accounts:

• Business owners and managers use them to track performance and control costs.
• Investors use them to assess risk and benchmark performance.
• Banks and lenders use them to assess creditworthiness and plan for repayment.
• Tax planners use them to minimise liability.

In short, Management Accounts are a valuable tool for all sorts of businesses and individuals. By providing insights into financial performance, they help stakeholders make informed decisions about the future of the business.

Management Accounts are actually produced in a similar format as your year-end financial statement, but it is more personalised to each business or to the needs of the Managers who use the reports. Management Accounts are the financial dashboard of your business in that you can look at it and understand how the business is performing.

Why Do I Need Management Accounts Services?

The purpose of Management Accounts is to provide accurate information to identify Key Performing areas of the business, so that the management team can have a real-time view of the business performance from a financial perspective. It can include forward-looking elements such as sales, cash-flow and profit forecasts.

The point of reviewing Management Accounts includes:

• Sales forecasting and hitting targets
• Cost structure and any direct cost-changing trends
• Allows a cash-flow forecast
• Previews and predicts the business’s profit or loss level during the year
• Reveals any business issues, especially those that are financially related.

While quality bookkeeping is important for all businesses, Management Accounts can be especially beneficial for small businesses:

1. By providing detailed financial information on a regular basis, Management Accounts can help business owners to make informed decisions about the future of their business.
2. Can help business owners to identify areas where they may be able to optimise their operations and cut costs.
3. By staying up-to-date with their management accounts, business owners will be in a better position to react quickly to any changes in the market or their industry.
4. Can help you keep track of your progress and identify any areas where you may be overspending.

As a result, keeping management accounts is an essential part of running a successful small business. This leaves you with more money to invest back into your business. This information can be invaluable when it comes to making changes to your business model.

Good business people understand that sales do not always equate to profit and that profit does not always mean cash-flow. Both sales and cash-flow are essential for a successful business. Without management accounts, it can be difficult to see the financial situation of a business until year-end. This is why it is so important for businesses to identify key performance indicators (KPI). By understanding KPIs, businesses can make key decisions that will improve cash-flow and ultimately lead to success.

Management Accounts give you an up-to-date view of your business’s cash-flow situation which is critical for success. They also enable you to benchmark your performance against similar businesses in your industry so that you can see where you need to make improvements. In addition, KPIs help you to track progress towards your goals and objectives and make sure that everyone in the organisation is working towards the same objectives.

If you don’t have Management Accounts for your business, then it’s time to talk to your Accountant about setting them up. It could be the best decision you ever make for your business. There are many more benefits you can enjoy from having a regular Management Accounts and use that as part of your monthly or quarterly performance review to:

• Understand your sales sources and spend your resources on where the most potential sits.
• Understand your cost structure, so you can see where you are spending money with very low returns – also called ROI (Return On Investment).
• Get a picture of the Company’s asset structure, so that you can determine whether you are putting all your assets in the most productive mechanisms.
• See how your cash-flow situation is, if you have big sales and increasing turnover, but you are not getting paid, the business could really be at risk.