Management accounts – Why are they so valuable to businesses?
With the financial uncertainty that many businesses face, it has never been more important for a business to have a clear vision of its financial health.
That is why more and more businesses are now employing management accounts to keep a closer eye on their finances.
A management accounting report gives specific insights into your operations and allows you to judge your business performance in the next week, quarter or year.
With the advent of online accounting technology, supported by an experienced adviser, management accounts can ensure you are equipped with the information you need to make key decisions about your business’s future.
Typical management accounts will contain:
At the top of your report, you will see an executive summary of your chosen period, showing your profitability, income, and general performance, along with a simple overview of your financial information. While some small businesses run quarterly reports, monthly ones can be more beneficial to your business.
In this section, you will see a summary of the cash flow in your business, how much money is leaving and how much is coming in.
Profit and Loss Report
Probably the section that most business owners home in on first for it provides details on how much money you have gained or lost during a period.
This provides you with a financial statement detailing all your assets, liabilities and capital at the current point of generating the report.
In this mini-report, you will see any sales invoices or receivables that are yet to be paid to your company during this period.
Likewise, this report shows you how much money you currently owe, along with how long this has been the case.
Other Discretionary Information
Most cloud-based accounting software allows you to incorporate a wide range of information in addition to that highlighted here.
By receiving regular management accounts, owners can compare their financial performance and find trends that could help them with the future direction of their business.
Management accounts are also useful for uncovering areas of weakness within a company by highlighting areas that are not cost-effective or unprofitable.
Having up to date management accounts can also be useful for acquiring a loan or seeking the sale of a business as it gives prospective buyers or lenders a clear picture of your company’s financial health.
Management accounting doesn’t have to be an onerous task, especially if you employ the right technology and seek out the right expertise.
If you have queries about management accounting, please our specialist accounting team at firstname.lastname@example.org or 01494552100 or your usual Seymour Taylor representative today.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 26 April 2021.