Joe Lennon FCCA highlights the different reporting elements of management accounts and the benefits they can bring to running your business.
Here's a potential surprise, management accounts aren't mandatory!
If you're serious about growing a businesshowever, you'll find they're key to achieving this. Why? The reason being management accounts contain:
The analysis you need to ascertain where your business is at from a performance perspective
The numbers necessary to understand the financial health of your organisation to help inform budgeting and investment
Without them it would be almost impossible to gauge accurately how well you're doing. As a result you'd struggle to make informed decisions on key matters such as the funding requirements in your organisation.
You know your business better than anyone else. However, it's not always easy to narrow down on what to focus on in your accounts. So we've put together this infographic with some suggestions to help get you started.
What should management accounts include?
This depends on where in the lifecycle stage the business is at, the sector it's in, and the goals the owner/directors want to set for the business. Typically management accounts will include:
Key performance indicators
Profit & loss statement
The cash position
The balance sheet
How often are management accounts prepared?
Management accounts are usually prepared on a regular and consistent basis to ensure a business owner or management team are getting the most out of monitoring their efforts. There is no set rule for this but typically they're produced monthly, or quarterly.
Remember your reports will be most efficient when tailored to your business. That means covering what's most important to you as the owner manager. The below infographic is designed to inform and get you thinking, it's not a definitive format.
Click on the image for a larger scale PDF version.
Be sure to work with an accountant to formulate what to report on in your management accounts, so as to inform and help drive future investment and strategic decision making.
This post was created on 19/06/2017 and updated on 29/10/2019.
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