What are they and why are they useful?
As an accountant I love preparing accounts, as clients you might see them as a necessary evil, documents to be filed at Companies House or the basis for your tax bill. They are so much more than that, however their disadvantage is that they are historical, are only stated in monetary terms and are highly regulated.
The big advantage of management accounts is that they are current and contain the information that you need to run your business. Most management accounts are produced monthly or quarterly, the same accounting policies are used as the year end accounts BUT they are not in any specific formats; one of my clients prefers their management accounts in a graphical format and that’s absolutely fine, a snapshot of the sales and profits at a glance with the detailed figures behind to back it up. You can have as much detail as you need.
We can help you prepare these accounts, identify key performance indicators such as breakeven point (the level of sales in units or £’s you need to make in order to break even) or debtor days (if you can improve this figure your bank balance will be much more healthy and it is easier to spot if a customer is taking longer than usual to pay you, a marker to watch). They can be used to forecast the rest of the year, giving a heads up on that dreaded tax bill. Can you afford that new bit of equipment? Is that department or branch pulling its weight? You can even publish some of it internally to incentivise managers and employees and make that extra push to beat the sales targets.
If you have set budgets for the coming year, you will need to measure actual performance against these; management accounts will give you the information to do that. If your budget is unrealistic isn’t it better to know sooner rather than later and be able to make those crucial decisions in a timely way?
Of course the management accounts are only as good as the information that’s input into your accounts software or spreadsheets, but imagine that after a whole year of highly useful management accounts you also have the basis for the year-end financial accounts with no surprises from us.
That’s what I call win win!
Denise Burley- Accounts & Tax
Any questions contact us !