What are Management Accounts?

Management Accounts for small businesses typically include a profit and loss account, balance sheet, cash flow statement and a report overview. They also include additional reports that offer an insight into business performance, which isn’t necessarily apparent from your statutory accounts filed to HMRC and Companies House.

What is the importance of Management Accounting?

A business is driven on data, influencing every key decision and strategy which is taken. The conciseness and relevance of the data available can often make the difference between a right and wrong decision.

The ability to analyse and review business performance – both good and bad, is hugely reliant on using current, targeted information. Without regular analytics, a company may be missing both opportunities and issues which could be overlooked if solely relying on your annual statutory documents.

Management Accounts can be produced whenever required; however this is most commonly completed on a monthly or quarterly basis.

What are the options?

Historically, Management Accounts have been seen as a time-consuming affair – either incurring lots of time costs from your external accountant, or potentially even resorting to hiring your own management accountant.

Recent advancements in software have resulted in improved efficiencies in preparing Management Accounts, as the ability to link with your Cloud Accounting software assists with the extraction of records in your preferred format.

Many of our current clients, both large and small, are now using our Outsourcing service to produce monthly Management Accounts for both internal and external use. The increased reporting has aided clients with financial planning and resource management in all aspects of their business.

What information could we receive?

There is an element of customisation available for each company, but a set of Management Accounts can be produced to include the following:

  • Profit and Loss: The income, expenses, and profit of the business. This can be expanded to include variance analysis which compares the results of one period to another (e.g. by year to date, or month on month).
  • Balance sheet: The assets, liabilities, and equity of the business. Again, variance analysis can be included to show the movement in assets or liabilities in a period.
  • Accounts receivable and payable: How much you are owed by each customer and how much you owe each supplier.
  • Ratios: This can range from comparing common ratios like your Gross Profit Margin, to bespoke industry-specific targets.
  • Breakeven: Often companies wish to assess the point at which the total sales cover the total costs of the business. This can be a key indicator for many new companies, but also relevant to established businesses who are assessing profits.
  • Cash flow: An insight in to where your cash has been received and used in the business.
  • Budgeting: A spending plan for your business based on your income and expense levels. Often used to assess over/under performances once the actual financials are received.
  • Forecasting: If you are expecting changes to your income or expense levels, it would be extremely useful to see how this may impact your business.

We appreciate that no two businesses are the same, so there is the option to tailor your Management Accounts to suit your company’s needs. Please click here to view our example Management Accounts.

How can we help?

If you’d like to know more about Management Accounts for your business, please contact our digital advisory team by emailing fintech@haroldsharp.co.uk or call 0161 905 1616.

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