We all know running a business (and in a global pandemic!!) brings many challenges but trying to make business decisions without up-to-date financial information can be a bit like driving with your eyes closed.
Whether you are trying to decide when to take on the next employee or deciding when to move to bigger premises, to more fundamental matters like whether to focus on growing sales or cutting costs, it is very hard to make important decisions about your business without up-to-date financial information to hand.
Management accounts are important for tracking, recording and reporting relevant financial and operational information to review the business’s performance, and then use these figures to help make informed business decisions.
There are no set standards for preparing management accounts and any business can design their own style according to their operation and business needs. The manage-ment accounts which will be useful to a small owner managed business, may look different to those of a large PLC, so we would sit and work through with our clients what exactly is useful for them.
Understanding the overall health of your business can mean the difference between success and failure and allow you to make timely changes if required. By producing management accounts on a regular basis, this will enable you to:
By producing these reports, you place a mag-nifying glass on your operating costs and expenses. In doing so, you can see which things cost too much without gaining you enough. Therefore, you can adjust your expenses appropriately.
Having the ability to analyse your cash flow enables you to rethink your budget. You can move more money to certain areas, reduce spending for others, and make sure that the cash flow in your company is consistently good throughout.
Management accounts can directly influence future profits, provided you can spot trends in the data. You can focus on parts of your company that are proven money earners, resulting in rising profits and keeping you clear of any potential losses.
Plan for the future
The information provided in these reports allows you to make more informed business decisions when going forward. For example, when hiring a new employee, you can use the financial data to weigh the true cost of hiring them against the benefit they provide, letting you judge whether the new employee will be an asset or a liability.
When reviewing annual accounts with clients after their financial year end, we really try to avoid the situation where clients did not realise, they were experiencing reduced profit margins or rising costs. Had they known soon-er they could have taken action to minimise the impact on their profits and results.
At Allchurch & Co we can help with the preparation of monthly or quarterly manage-ment accounts and can provide anything from a simple snapshot to an in-depth analysis of the key figures. We have limited capacity for this service, so if you believe this would add value to your business then please get in touch to find out how we can help.
Allchurch & Co – Chartered Accountants
www.allchurchco.com / firstname.lastname@example.org / 01792 439438