Management accounts are a set of financial reports, which you generally produce quarterly or monthly. These are not the same as the year end accounts you prepare for HMRC.
Using management accounts, you can monitor the performance of your business regularly.
The information in these reports should help you maintain control over your business, and take any necessary action based on the information these accounts give you.
Unlike annual accounts, management accounts are not something you must produce by law, but they can be hugely valuable in supporting your business, its goals, and strategies.
Every business needs three fundamental financial statements:
Managing these aspects of your finances should be a routine part of your bookkeeping. But analysing what these figures mean is the function of your management accounts.
Management accounts can help you spot patterns, or flag up concerns that will influence your business planning.
They should provide an insightful analysis of your financial data.
Besides analysis of profit and loss, cash flow and your balance sheet, you can expect to include key performance indicators in your management accounts. These may use a range of measurements, such as customer satisfaction, or how effectively your business is delivering on its targets.
Because management accounts are not mandatory, there’s no set way of doing them. They should be specific to your company, and to your business needs.
Ultimately, the finished structure of your management accounts will depend on what information is important to you.
Management accounts can give you proper visibility of what is going on in your business.
The principle is; if you can measure something, then you can improve it. This applies to the type of information you should include in your management accounts.
Key objectives of management accounts include:
There’s no right or wrong answer to this, but at a minimum we would recommend you complete management accounts on a quarterly basis.
Remember, they’re providing you with valuable information for you to work from and base your business decisions on.
Therefore, the more up to date this information is, the better informed you’ll be.
Some companies opt for monthly management accounts for these reasons. It will depend on what information you require, and how you plan to act on it.
No. Management accounts are not a legal requirement.
In fact, you do not have to produce them at all, but they’re a useful means of exercising control over your business.
Think of it this way: where will you stand in relation to your competitors, depending on whether they do, or don’t, have management accounts of their own?
The more you understand your business, the more you can improve it.
If you use a chartered management accountant to produce your management accounts, you’re drawing on a well of professional experience and insight.
A qualified accountant will be able to drill down into the details but also look at the wider context, providing a management consultancy service to you. This is based on your accounting data.
Providing sound management accounts with the right analysis, tailored for your specific business needs, is a skill. It makes sense, therefore, to use a skilled practitioner for this purpose.
Operating from our London head office, Venn Accounts a traditional accounting firm. We are committed to ensuring all our clients are completely clear about what we can do for them, while fully supporting them every step of the way.
Contact us and speak to a member of our team about our annual account service.
