Management accounts are vitally important for every business.
Not having management accounts is simply not an option and yet we continue to see companies, some with multi-million turnovers, that have nothing like the management information they need to run their businesses.
Organise a management accounts makeover.
Management accounts makeover
Your MONTHLY management accounts should include as a bare minimum:
- P&L for last month and for the year to date, compared with budget and with last year
- Month by month P&L for the last 12 months
- Balance sheet
- Aged debtors and aged creditors
Plus any further analysis, such as profit by client, profit by service / product that is relevant to your business.
And, if you are concerned about cashflow – you need to be reviewing a cashflow model!
Your management accounts need to be correct to be useful
If you have the wrong information you will make the wrong decisions and probably think you are richer than you really are.
Some numbers in the management accounts are estimates, that is inevitable, but they should be accurate estimates.
Other numbers, such as your bank balances, can be exact because they can be agreed to your bank statements.
If you have stock – count it and value it at least every quarter.
And make sure you are recognising the cost of depreciation of fixed assets each month and, assuming you are making a profit, make a provision for the tax you will have to pay.
Get the accounts out quickly
Aim for no more than five working days as a deadline. Information is better fresh and waiting a month to know what happened last month is pretty pointless.
Setting a five day deadline will throw up issues in your business about people and processes. Both need to be fit for purpose.
The aim with management accounts is to make their production a routine, quick process and then to use them, along with other data, to monitor and improve business performance.
If it feels like pushing a very heavy boulder up a very steep hill – ask for help. It’s a false economy not to.
Any thoughts? We’d love to hear them so let us know!