How does management accounting help with decision-making?

You need to base critical business decision-making on sound financial data, and management accounting is the information system that will provide it.

It’s also crucial that this data is up to date, and that analysis and interpretation of it are clear and insightful. This where the management accountant has a pivotal role in supporting businesses and supporting their decision-making.

There are several ways in which you can use management accounting information to make decisions.

Business Planning

You can use accounting data to plan budgets and create forecasts. However, while annual figures offer some basis for forecasting and planning, having more regular analysis enables you to compare your forecast with actual performance, month on month.

Monthly management accounts provide visibility of shifting patterns and emerging trends, enabling you to refine your predictions and budgets accordingly.

Key aspects of management accounts are profit and loss and cash flow data. These provide useful snapshots of the financial health of your enterprise and will help you identify risks that need addressing, and opportunities for improvement.

Performance Analysis

The inclusion of key performance indicators (KPIs) in your management accounts gives you the basis for continuous analysis of how different areas of your business are performing.

You can tailor these KPIs to suit your specific business needs, and they may be either financial or performance-based goals or can combine both.

Here, you’re not simply looking at performance after the fact, but very much gauging it in the here and now, and using KPIs to monitor and refine different areas of operation across your business.

Allocating Funds

Where your business is in the fortunate position of attracting new investment, management accounting can help you allocate this extra cash where it will be most effective.

The data will highlight where there are both short-term and long-term needs, and how to prioritise them when it comes to funds.

Operational Changes

Measuring performance helps you understand where to make essential operational changes, such as:

  • Controlling stock levels
  • Monitoring and controlling overheads
  • Managing capital working cycles
  • Establishing break-even points for your profitability.

Marketing Strategies

The information contained in management accounts doesn’t just support the nuts and bolts of decision-making.

It can also support key marketing strategies, by measuring changes in gross margin percentages.

Sometimes you can increase sales by cutting prices, but in other instances, you can actually benefit by putting up prices for specific products or services in certain markets.

This fine-tuning is only possible if you have the information to base it on. This information comes from management accounts.

What Informs Your Decision-Making?

Maintaining or improving your competitive edge and your performance means making business-critical decisions.

What evidence and advice will you use to make these decisions? The support of a professional chartered management accountant can give you the information and guidance you need to grow your business.

To learn more about our management accounts service, please call the team at Venn Accounts on 020 8088 2590, email or fill in our contact form and we’ll be in touch as soon as possible.

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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.