Management accounts help those running a company to understand the financial side of their business. Used as a source of information to make strategic decisions, they are often prepared on a monthly or quarterly basis, and can be tailored to a company’s individual needs.
Management accounts are not a legal requirement as with financial accounts; they act as more of a guide. Southside Accountants in Streatham SW16 offer management accounts preparation as part of their service, helping clients to understand their business finances.
What do management accounts include?
They can include any information that would be useful to management, and be as straightforward or as complicated as necessary. It all depends on what information is needed to make long-term decisions.
They often include some or all of the following:
- A summary containing Key Performance Indicators, and a plan of action to remedy any shortfalls.
- End-of-period Profit and Loss Account comparing current data with those from the same period last year, or a comparison against budgeted figures
- A Balance Sheet showing a snapshot of the company’s working capital position
- A cash flow forecast or budget to assess future cash requirements
- Non-financial information to aid decision-making, such as changes in market conditions, staff productivity levels, or the number of customer complaints
In essence, any information that helps to provide a clear overall picture of business performance. Southside Accountants in Streatham SW16 can help you decide what to include in your management accounts package.
Why are management accounts used?
Rather than merely providing the numbers, management accounts should include a commentary on how these figures affect the business as a whole, using the previous year or budgeted figures as a comparison.
Strategic decisions are made easier with the use of management accounts. Badly performing products or services can be highlighted and possibly axed, they could also demonstrate the need to expand into other areas, or offer new services.
Many risks could come to light, including cash flow problems, new competition, or the fact that the company depends too much on one or two customers.
Cash flow forecasts and budgets play a significant part in the planning process.
Information revealed by management accounts often needs to be dispensed to departmental heads or sales staff.