If you are looking to grow your business and need a tool to help you, then management accounts could be the answer.
What are Management Accounts?
Management accounts are produced on a monthly basis, and comprise the following reports:
- A profit and loss report – this is a summary of your sales income less day-to-day running costs, which are broken down into spending categories.
- A cash flow report – this shows your monthly bank transactions, broken down into income received and money spent on both expenses and liabilities (e.g. VAT payments).
- A balance sheet report – this is a summary of your company assets (e.g. cash, equipment) liabilities (future payments due e.g. Corporation Tax) and retained earnings (the profit in the company plus shares).
- A trade debtor report – this report details which clients owe you money for invoices you have raised.
- A trade creditor report – this report details which companies/suppliers you owe money to.
- A sales report – this details the invoices you have raised in the month.
What are the Benefits of Management Accounts?
There are many benefits of management accounts:
- They provide up to date information:
In contrast to your annual accounts which give historic information about the performance of your company, management accounts provide real time information about your business’s operations and are therefore a more valuable decision making tool.
- They can be used to identify trends and make decisions:
As management accounts are generated monthly, you can clearly identify trends in the figures, and act accordingly. For example, you may see that your trade debtor figure is increasing month by month. This could mean that your customers are not paying on time, and as a consequence you don’t have enough cash to pay your bills. You can therefore act fast to chase and collect this money.
- They can be used to reduce unnecessary expenses:
Monthly reports mean that you will be able to easily see your monthly expenses and you may be surprised how much you are spending in certain areas of your business. With this knowledge, you can act to control and possibly reduce your spending in these areas and therefore improve your profits.
- They are a useful planning tool:
Management accounts can help you understand how much your service costs to provide, and how your company is making money. You can use this knowledge to plan for profits and growth over the long term.
If you feel that management accounts would benefit your company’s performance, please get in touch and let us help your company to grow.