A question we get asked a lot is “Do I need Management Accounts for my business?”
Watch our video to learn more about Management Accounts and how you and your business can benefit from them.
Well – that depends. And there is also a difference between needing and wanting! But, in this short video I’ll explain the benefits of Management Accounts to your business.
And I’ll also tell you why you should be excited about them!
WHAT ARE MANAGEMENT ACCOUNTS?
Management accounts are sets of financial statements that are prepared throughout the year. They’re not a legal requirement – they’re just for internal use to help you manage your business – but they give real-time information on how the business is doing.
They can include whatever figures are useful for your business. As a starting point, you’d probably want a Profit & Loss, Balance Sheet and a Cashflow, but you can then tailor them to pick out the key areas for you.
For example, we work with our clients to pick the key drivers and Key Performance Indicators for the business.
For some, this might be new customers but we can then take this back a couple of steps to trace the conversion rates from “Leads” to “Meetings” to “Quotes” to “Customers”. For other businesses, it might all be tied into the website – our software talks to Google Analytics and can pull these figures into the same report.
And it’s good if the management accounts are clear and interesting to look at. We use lots of diagrams/graphs to make the figures easier to read, and trends easier to spot.
WHO NEEDS THEM?
Our suggestion is that any business with annual sales over £500,000, or with plans to grow by more than 10% each year, should have them.
Smaller businesses may want Management Accounts but, if you have big goals and your business is growing, you will start to need them.
WHAT ARE THE BENEFITS?
There are lots of great reasons to prepare management accounts.
- Making informed decisions – how can you make decisions if you don’t know exactly where the business is right now? Management accounts give you up-to-date financial information so you can make the best decisions for your business
- Putting you in control – with the knowledge you have, you’re in full control of your business. Waiting until a year-end can be too late to spot trends and changes that need to be made right now
- Tracking your progress – how are you doing in reaching your goals? If you’re not measuring your progress, how are you going to get there? How will you spot if you’re off track? And what tweaks you might need to make to catch up? As well as the standard financials, including your KPIs in the management accounts keeps you on track
- Tax planning – knowing your profits before the year-end helps plan and minimise your tax bills
In a nutshell, a good accountant and Management Accounts are the difference between taking your business from where it has been to where you want it to be.
There is an acute offering of accountability – the Management Accounts, the Review Meetings and the dedicated hands-on support is accountability on your numbers to ensure that you stay on track, so that there’s no chance of you not meeting your budget and your forecast expectations.
If we work with you, I guess you could call us your finance coach! It’s like having your own external financial controller to ensure that you get where you want to be.
I’ll give you some examples of the feedback our clients have given on Management Accounts meetings recently.
One of our clients runs a 7-figure turnover business and said that, although he does understand finance, the big difference is having the external viewpoint and confirmation that they’re doing things right…or that they need to change.
Another, who runs a large business but is not financially minded, said that the Management Accounts meeting was “the first time I’ve still been awake 10 minutes into a meeting with an accountant.” High praise indeed, but he has said many times since that he actually gets excited about…and looks forward to…the meetings!
And, to use that word “excited” again, a client recently said after her first ever Management Accounts meeting that “I have nobody else to talk to who fully understands my businesses and helps me make decisions. Having you on my side is a huge boost to my morale. I’ve never had the numbers in my business dissected in such detail and this has allowed me to make a concrete decision and has made me excited about the future.”
I really like the feelings that people get from having full control of the numbers, but there are financial results too.
For example, a new client fixed a problem in his business that we spotted in the first Management Accounts meeting when looking at the margins. That problem was costing him thousand of pounds each month but it’s been fixed quickly, instead of waiting until a year-end by which time the losses would be much larger.
So, there are lots of good reasons to need Management Accounts, and many reasons to want them too.
If you would like to know any more, please do get in touch.