We break down the what, who and why all important questions on management accounts…
What are management accounts?
Management accounts are a set of summarized financial numbers which are designed to help business owners understand the parts of their company which are performing, and also understand the parts that aren’t. These are ordinarily prepared and presented monthly, but can be prepared either as often as you require or to suit the KPI’s of the business.
Management accounts can include, but are not limited to:
- Profit & Loss
- Balance sheet
- Current year projections
- Performance against previous year
- Performance against projected
- Cash flow reconciliation
- Cash flow projections
- Non-financial information
- Any other information as required by users
Who needs management accounts?
They can be prepared for any business types, sole traders Ltd companies and partnerships etc. There are no legal requirements to prepare management accounts, such as there is for year-end accounts.
Why should I have management accounts?
Being able to make correct decisions as a manager/owner of business is what we all want. Waiting for the yearend accounts to be prepared, could mean opportunities are lost, problems could become worse. Management accounts ensure that this is not the case, or at least give the business the best chance of being successful.
Having an in depth analysis of where your business is up to financially on a monthly basis, whether it is to help ensure a profitable business stay profitable, or a struggling business identify issues early as possible, and return to profitability.
Can you answer these questions?
- What is your monthly gross margin?
- What are the businesses monthly overheads?
- What is the businesses monthly break-even point?
- What are you expecting profitability next month to be?
- Are you expecting any seasonal variations?
- Are there any recent fluctuations in your costs? What areas do they relate to? And if so why?
- Are there going to be any cash flow issues arising in the near future?