The Importance of Management Accounts
Do you know what Management Accounts are? Do you understand their importance?
I have found that many accountants don’t really cover off with clients the importance of management accounts, nor do they provide a clear enough picture of how a business can benefit from them.
Management accounts are basically a periodic review of where your business is financially and are typically provided on a monthly basis or sometimes quarterly if the business is in a steady state. Most often, management accounts in their basic form provide a profit and loss account and a balance sheet, but you can discuss with your accountant to begin to get other management information that is useful or even essential for you to run your business and make better decisions. The information obtained is almost limitless depending on how it is captured in the first place. You can analyse client growth, gross margin per product, contract or project. Review your sales in comparison to your headcount, compare current year performance against prior year, budget or industry comparisons and much much more.
But why is it important? If you run a limited company you will know that your statutory accounts are due nine months after the end of your financial year, and many of my clients have experienced this level of performance with their old accountants. I struggle to see how having your accounts produced so far after the end of the trading activity is any good for making business decisions now. Through having a decent set of timely produced management accounts, a business owner can make much more relevant and informed decisions reducing the potential risk of those decisions to the business.
In times of uncertainty in the marketplace, in my opinion, it is essential to have clear and timely management information to help business owners navigate through tricky waters.
If you want any further information then please do not hesitate to contact Clear Vision.