What are management accounts?
Management accounts are different from the day to day bookkeeping, though they do rely on the bookkeeping to be done correctly. Management accounts are the financial reports used by business owners and managers to provide a financial snapshot of the business. They can help see how well you have done over a certain period of time e.g. have profits increased through to looking at key performance indicators such as how long on average customers take to pay you.
What reports make up management accounts?
Traditionally these will be a profit and loss, a balance sheet (provides a snapshot of the health of a business) which shows; assets, liability and equity as well as a statement of cashflow. They can include a rolling profit and loss as well as departmental profit and loss.
What can management accounts show me?
Management accounts are really important for strategic decision making. They help to provide a financial ‘health check’ for your business. You may want to know if a certain line is profitable and worth continuing or if you priced a job correctly and made enough profit. Without looking at the finer details you won’t be able to see if certain areas of your business are working as well as you had hoped. You may continue to make the same mistakes month after month, which can lead to making a loss each month instead of a profit. Management accounts can let you tweak things each month until your business is performing as you hope.
Key performance indicators
Key Performance Indicators or KPI’s can be really useful they can show you how long on average it takes to be paid. You may not realise that on average it takes 45 days to get customers to pay when you assumed it was 30, this can cause cashflow issues. You may discover the your payable days are 5, your suppliers may be happy but your bank account isn’t. Examining these and putting an effective credit control procedure into place can make a big difference to cashflow.
Other KPI’s may be inventory holding period, working capital cycle and current ratio (your businesses ability to pay it’s financial short term obligations).
What are the benefits of hiring an accountant?
Hiring a management account in Cornwall can be a really worthwhile addition to your business. You may be reading the above and are not quite sure where to start, a management accountant can provide real value to your business, by providing insights into the actual performance of your business. You may have a feeling about how your business is doing but quite often management reports can be a real eye opener.
How can Tidal Bookkeeping Cornwall help?
If you are looking for an insight into your business please get in touch for a chat, you can call us on; 01209 702920 or use our contact page here. As well as regular bookkeeping we can provide management accounts as well as part of our weekly, monthly or quarterly service. We are a remote bookkeeping and accountancy firm covering Cornwall and other areas in the UK.
The information featured in this article is for guidance only, no liability is accepted for the opinions it contains.