What are Management Accounts? What are the benefits? How do I prepare them? Find out in our handy video and guide.
What are management accounts?
Management accounts are just another set of numbers, aren’t they? Why would you want them? Well, most successful entrepreneurs swear by them as they can put you totally in control of your business.
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 – 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 (KPIs) 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.
What are the benefits of management accounts?
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
- 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
How do I prepare management accounts?
These days, there’s no excuse for a business owner not to prepare management accounts. With cloud-based software, you can be on top of your business numbers in real time.
Xero can prepare management reports for you or, if you want to step it up a level, there are add-ons that can being in lots of non-financial information as well. For example, we use Spotlight and are proud to be a Spotlight VCFO.
If you’d like to know more about the benefits of management accounts and how you can be in full control of your business, please get in touch.