Know your business - making the most of management accounts in 2018
8th January 2018
Most people recognise the importance of measuring performance, but how often do you take the time to really understand what’s going on in your business? Do you only focus on the bottom line once a quarter, or take a quick look at sales? You could be missing vital signs where your business needs a lifeline, or opportunities which would take it to the next level. That’s where good quality management accounts can make a real difference.
Gone are the days when management accounts were just about financial data, such as profit and loss and balance sheets. Thanks to advances in new technology and access to data, more and more clients are using holistic management accounts as the principal tool to monitor and manage the effectiveness of their business as a whole.
Management accounts perform three important functions:
· Monitoring the progress of your business: Showing how your business is performing against targets, allowing you to proactively identify any areas where performance may need attention.
· Producing simple key performance indicators (KPIs) that suit your business: Helping you to focus on the key drivers which are critical to the success of your business.
· Identifying trends: Combining the KPIs with regular progress monitoring provides the tools your business needs to identify underlying trends, opportunities and threats.
The key to using management accounts as an effective business tool, is tailoring the information to focus on the priorities and specific needs of your business. For example, highlighting research and development (R&D) costs which could count towards R&D tax credits, or monitoring the performance of a particular division within the business.
In our experience, few people want to read pages and pages of reports and spreadsheets, except, perhaps, for us accountants! It’s the supporting analysis from experts who understand your business that is crucial, giving you important insight and highlighting any opportunities or concerns which need addressing.
The message is, management accounts are more than just a tick box exercise in monitoring sales and profits. Good quality reporting gives you a holistic overview of your business performance, helping you to spot any issues before they become a problem, or even a crisis.
For more information, read the full article on page 3 of The Bottom Line.
If you have any queries or would like more information on our management accounts service, please contact: