Management accounts are an indispensable tool to guide your decision-making when it comes to financial reporting.
Consistent financial reporting needs to be a core part of your financial strategy to ensure sustainable business growth.
Naturally, year-end accounts will form the backbone of your reporting but, to properly carry out your growth strategy, you will need to understand cashflow, profitability and overall performance throughout the year.
It is important SMEs produce management accounts to create and maintain a successful growth strategy.
Management accounts are like year-end accounts but are produced informally.
They are done for the benefit of directors or other stakeholders, rather than to comply with legal requirements.
They will look different and contain different information depending on the size of your business, the sectors you work in and who they are for, but they will normally contain:
For example, you may request an expense report to identify whether expenses are reasonable or not.
Unlike year-end accounts, monthly or quarterly management accounts don’t have to contain all key financial information regarding your business.
These accounts will illustrate how well the business performs and are tailored to individual requirements.
Management accounts are useful for identifying your margins, trends, and profitability.
They are used by directors and managers of a business, but they’re also useful to lenders, accountants, financial planners, and investors.
Here’s how you can create space for this crucial indication of your overall business health:
Management accounts are not mandatory.
In fact, the majority of small businesses don’t produce them at all.
There are several reasons why this is, including:
If you do choose to produce management accounts, it’s then up to you how often you do it and what information goes into them.
Ultimately, management accounts are beneficial to stakeholders of any business – a small amount of information, you’ll be able to see how your business is performing and make adjustments throughout the year.
If you would like help with your management accounts, please contact a member of our team today.