What are Management Accounts and Do I need them?
Posted on 17th Jan 2022
Let’s be honest, how many of us really understand our numbers and what they are actually telling us. The reason for this is that many of us don’t even know when they need to be produced, how frequently, or what should be in them.
Most people know they have to have accounts produced at least once a year, to satisfy HMRC and possibly Companies House, but how many of us really see them as value for money? In truth, very few and that is because Annual Accounts are at best a few months out of date before we even get them.
Well, it’s my mission to make sure you really do understand the value that having and knowing the value your numbers can make. I want to lift the shroud of mystery that many accountants try to make of the numbers. I genuinely believe it’s really important for you to have, review and understand your numbers and I’m really sorry to have to tell you but once a year just isn’t going to cut it. Not if you want a successful business.
By having the right information, in a clear and concise way, at the right time will transform your business, it will:
- Help you keep your finger on the pulse of everything that is going on within your business
- Help you identify issues and resolve them quicker than would otherwise happen
- Ensure nothing slips through the cracks
- Ensure nothing is overlooked
- Help you make better decisions by building in strong financial discipline on a regular basis
- Makes your business more fundable
- Makes it easier for banks to say yes when asking for an overdraft or other loan!
So if you want to have a handle on what is happening in your business, is it going to enable you to meet those goals you set for the year in terms of taking your family on that dream holiday, changing your car to the latest model or moving house or whatever it is that you are running your business for, one set of statutory accounts once a year isn’t going to cut the mustard. What you need is monthly or at the very least quarterly accounts, that you understand, and you can see what is happening to:
- Trends in your business for example is your turnover increasing or decreasing
- Profitability of individual products and services
- Peace of mind that your business is going in the right direction
- Knowledge that the key metrics or key performance indicators are under control and moving in the right direction
- A real understanding of what cash is needed in your business and how that looks.
The real value of Management Accounts is not only in the numbers themselves but more importantly in the discussions it enables you to have with your accountant.
One Page Strategic Plan
My most successful business owners have an annual one-page strategic plan, which list their goals, the key KPI’s, ideal customer and key numbers they need to achieve in the next year, split down in to 90 days chunks. Then we measure the progress by looking more closely on a monthly or quarterly basis at the management accounts and what those numbers means. We then discuss the actions that will move the business forward over the next 30 or 90 days, set actions and then hold the business owner accountable to achieve those goals.
We are in yet another calendar year….are you on track…did you even have a plan to work to or did you just drift…you’d be amazed at how many business owners do this and expect to be successful…..If you want the next financial year to be a success then maybe it’s time to get a plan and then work the plan…remember the definition of insanity is doing the same things and expecting different results.
If you’d like help to pull a plan together or would like to speak about what management accounts could mean to your business, then give me a call on 0161 410 0020 or email me at firstname.lastname@example.org