There are two main ways a small business can approach accounting:
Management accounting embodies the second of these two approaches. It goes beyond number-crunching and compliance to provide regular, useful data and analysis, which forms the basis for sound decision-making.
How does management accounting provide value to business? By offering clarity, insight and expert knowledge and guidance.
Management accounting gives you heightened visibility of your enterprise’s ongoing financial health.
Successful business growth means monitoring your performance throughout the year, and not leaving it until the end of the financial year. Professional analysis of up-to-date management accounts, whether monthly or quarterly, provides consistency and clarity.
A management accountant will offer considerable added value by using management accounts to look ahead as well as review what’s going on at present.
Management accounts are a useful means of identifying strengths and weaknesses and provide valuable data for planning budgets, forecasting trends and improving performance.
Just because your balance sheet looks healthy doesn’t mean your business is too.
You need to be able to identify operating trends, such as changes in sales volumes, which could impact your business in the future.
Management accounts can give you the details you need to make informed decisions.
You can glean much more useful information from ongoing sales and costs figures, than by simply looking at end of year totals.
With monitoring of cash flow, and profit and loss, you can plan your allocation of money more carefully, and pinpoint areas of concern earlier rather than later.
Management accounting can help you plan accurately when to make certain transactions such as tax payments and dividends, to minimise the impact or maximise the benefit.
Where there is a heightened risk of fraud or malpractice, management accounts can alert you to this, and expose any wrongdoing.
Regular visibility of key performance indicators (KPIs) ensures you’re firmly in the driving seat, because the more knowledge you have, the better you can exercise control over your business.
If you want to gain the necessary insight about your business’s performance to then improve it, you need regular, reliable information and analysis.
Knowing your numbers isn’t simply about compliance with HMRC and doing what’s required by law.
It’s about proactively using accounting data to shape how your business operates, and how it competes in the marketplace.