Preparing management accounts probably sounds about as much fun as rearranging your sock drawer… but the rewards are infinitely greater.
Done properly, management accounting will help you to make more informed business decisions, manage risk and – best of all – maximise profits.
What are management accounts?
Management accounts are primarily forward-looking, are made available only to internal staff rather than the wider public and are prepared to your needs rather than to comply with any government-set rules.
These 3 things set them apart from the annual accounts that your accountant prepares.
Variance analysis, forecasting, planning, reviewing, and monitoring costs are essential components of management accounts.
Regular reports help you work out where your business’s main expenditures lie so that costs are transparent and can be reduced wherever possible.
What are the benefits of keeping management accounts?
Here are some of the key benefits of keeping regular management accounts:
- You can compare your management accounts monthly, quarterly or yearly to accurately monitor both financial growth and overall business performance.
- If you’re looking for trends in revenue and cash flow, you’ll be able to generate a better prediction of your future income. You may even notice seasonal variations in cash flow, allowing you to plan and budget accordingly.
- Management accounts are a crucial component of any business plan, and investors like to see them. You may approach investors confidently, certain in your knowledge of the company’s performance.
- You can make any necessary adjustments when you understand your cash flow. If clients take a lengthy time to pay, you may improve your collection procedure or make other credit decisions more quickly. Conversely, you can create loyalty programs and attractive deals to incentivise or reward your most loyal customers.
What should management accounts include?
Management accounts will cover some or all of the following:
- Strategic planning and management advice
- Price modelling and product profitability
- Client profitability analysis
- Cost analysis and allocation
- Annual and capital budgeting
- Sales and financial forecasting
- Business metrics development
- Sales management scorecards.
How often should management accounts be prepared?
Management accounts are most often prepared on a monthly, quarterly, or annual basis to ensure that your company’s management team is getting the most out of monitoring your activities.
There is no hard and fast rule to how frequently management accounts should be made, other than as often as is feasible and required for your unique circumstances.
Your reports will be most valuable when they are tailored to your business. That means covering what’s most important to you as the owner or manager.
Work with a management accountant to grow your business
A competent, qualified management accountant can assist you with your management accounts, since they are well-versed in interpreting data.
They can assist you in examining your financial statements and extracting information, patterns, or warning signs that may help you make better informed decisions.
If you do not currently employ a management accountant, you may find that you are missing out on opportunities to grow your business.
Dunkley’s have been providing this service for businesses of all shapes and sizes for many years.