When you’re running a business, making sure you meet all the statutory requirements can be quite overwhelming, so why would you want to create additional work and give yourself yet more figures to pore over?
1. Better decision making
Although they’re not a legal requirement, management accounts can provide your business with the crucial insights that enable better, and better-informed, decision-making.
If you’re only ever relying on statutory financial accounts then you’re limiting your outlook, always looking in the rear view mirror at what’s passed. This is not to say that historic information isn’t useful for learning lessons that can be applied in the future but, armed with a set of management accounts designed around your business’s specific requirements, you have a timely (e.g. monthly) and up-to-date picture of how your business is doing.
2. Improving profitability
Through your management accounts you may learn that:
- Your sales have increased compared to the same period last year.
- However, an examination of the cost of those sales reveals that your service is getting more expensive to deliver, so you should consider increasing your prices or looking at ways of delivering more efficiently.
- You’re overspending on certain areas such as rolling subscriptions that may have slipped your mind.
- You’re not investing in marketing which may explain a slump in sales.
In this way you’re able to understand and identify any underlying issues in business performance within the current operating period and so are able to move decisively and swiftly to address these, in the moment.
3. Raising the alarm early if cash flow becomes difficult
An up-to-date cash flow forecast that’s easily referred to, can highlight future cash flow constraints – something that’s especially important if your business is seasonal. For example, the forecast will enable you to see exactly how Christmas trade can impact quieter times and summer, and how summer trade impacts quieter winter periods. This helps you take steps to address cash flow difficulties.
Finance providers are also far more likely to lend money if you ask for it in advance and at a time when it doesn’t look like you need it.
4. Having business information at your fingertips instills confidence
Being armed with information makes you wiser. This wisdom means you have greater confidence in yourself, your team, your family and others that you may not even have thought of yet such as bank managers or potential business purchasers, should that opportunity arise. You’ll be pleasantly surprised by how this knowledge and confidence can put a spring in your step.
5. It’s an easy way of keeping control and minimising the stress of business management
Management accounts consist of largely financial and statistical information with items such as the profit and loss account, the balance sheet and cash flow forecasts at their core.
At Harlands, we’re gurus in cloud based software such as Xero and Quickbooks (we’re Xero Certified Advisers) and other financial management solutions that can make the process of collecting data a doddle for you. But data is only ever part of the story – interpretation is key.
In order to help you drive your business forward and realise your goals, we add context and meaning to this information: highlighting direction of travel, areas of concern and/or congratulation, and charting how the business is evolving. Working with and building around each individual client’s needs, we identify the areas management accounts should focus on, and we promise that the discipline of holding regular meetings based around their findings will give you not only something to look forward to but more control over your business.
We can help
Want to discover how management accounts could work for you? Give us a call or drop us a line and let’s get the ball rolling on the difference these insights could make to your business.