Management Accounts

 

Management accounts provide surveillance of your company’s progression, looking at all financial aspects to gain an insight into the strength of the business and where it is heading.

 

What are management accounts?

This is an overview of the profit and loss position of your business over a period, usually a month or a quarter. They also show the Balance Sheet which is a statement of the company’s assets and liabilities or it’s financial position.

Management Accounts normally include KPI’s and reports vs budgets. Management can also be extended to include narratives around the business and forecasts against future performance and cashflow.

 

How can management accounts help my business?

Management accountants are overseen by our managed services team who apply their experience, skills and techniques to identify accounting inaccuracies and issues. This service provides business owners with detailed, up to date information that is updated in a timely manner.

To coin a phrase, if you don’t know where you are how can you know where you are going? Management Accounts are a fundamental part of the next step of profit and loss and cashflow forecasting.

We can help you drive decisions by providing financial information in:

  • Evaluating business performance
  • Specific products
  • Production
  • Departments
  • Choosing areas of operational focus

Management accounts should not be viewed in isolation and can form part of a wider pack of information that can be used to help innovation and highlight areas of potential risk.

 

Forecasting

Financial forecasting is using integrated models to determine the future of your business. Using your current finances, we can make informed predictions for the short-, medium- and long-term scope of your business. There are many benefits to using forecasting, you can understand where growth may occur and what potential issues you may face down the line. It allows your business to develop focused thinking and strategize better, utilising your funds in a more appropriate way.

We can offer forecasting on a multitude of levels, from working alongside your financial team to offer support to a complete overhaul where we handle every aspect of your finances.

 

How does management accounting differ from bookkeeping?

Bookkeeping is the recording of the initial raw accounting data. Good bookkeeping is the essential starting point in the production of management accounts but not the end of it.
When the bookkeeping work is done, the management accounts production and analysis of the numbers begins.

Management accounts take bookkeeping to the next level, quantifying raw data and interpreting these figures to give businesses a clear and accurate statement of affairs.

Whilst bookkeeping is your core entries of day to day activities, it does not take into account issues such as timing of services, variations in stockholdings, depreciation of assets and many more issues that ultimately affect your bottom line profit. That’s where management accounting steps in with adjustments to reflect the true performance of your business.

 

I already prepare management accounts, so why do I need you?

Even if your business prepares management accounts, we often find that a third party and independent, objective review from us gives further credibility to the numbers and provides re-assurance to stakeholders alike.

We can work in partnership with your finance department, helping to review and support your current situation. Equally, we can provide guided advice on managing any potential financial risks as well as presenting the data in the best way for you and your team.

We can provide accurate financial information, helping assist you in generating new opportunities. By understanding the current state of your business and your outlook, we can identify areas in which you could progress, this could be in the form of a funding application or R&D claim.

 

Many of our clients have seen first-hand the benefits of a robust, management account. To read how we helped these businesses, see our VFO testimonials here.

Ultimately managed services provide a base for businesses to progress or mitigate any weaknesses in the business, if you think your business could benefit from this level of assurance and opportunity, contact our team here.

 

Our VFO is made up of:

 

Q&A

What are the advantages of preparing Management Accounts?

To give you an accurate view of how yours business is performing, allowing you to take action ahead of upcoming deadlines and issues before it is too late.

To coin a phrase, if you don’t know where you are how can you know where you are going? Management Accounts are a fundamental part of the next step of profit and loss and cashflow forecasting.

How long after my period end should I have Management Accounts?

That depends on the business complexity but typical SME business turnaround times for management accounts range from 10 days to a month after the period end. This is often driven simply by the time it takes to collect records, receive and record purchase invoices and so on.

Do Management Accounts have to be a specific format?

No they don’t.

We find that a mix of narrative, graphs, infographics and lines of numbers (because accountants are good at reading lines of numbers) works well. We often add/remove information such as KPI’s to suit individual business needs.

Are Management Accounts the same as statutory accounts?

The number may be close but no, they are very rarely the same format and they are very rarely 100% the same result as in your statutory accounts. This is because for some items you may put off decisions until you have the full year end picture (e.g. making stock provisions). Statutory accounts often have a much longer time frame for preparation hence corrections to things like accruals estimates can be adjusted.

Management Accounts should also be useful to the business as you go throughout the year. Therefore they may include additional information, or further breakdown of information

What’s the difference between a budget and a forecast?

A budget sets out how much expected income and expenditure you have for a period, usually a year. This is often communicated to cap spending by departments and reported back on as part of management accounting.

A forecast takes budgeting a step further, this usually accounts for changes in a budget (perhaps caused by delays or changes in pricing). A 3-way forecast then gives a projection of the end of year results, plus a forecast balance sheet position plus most importantly a forecast cash position.  The ‘cashflow’ page of a forecast is usually regarded as the most important page and can be used to identify any potential bank loans / borrowing requirements.

What is a KPI?

A Key Performance Indicator is a measure of business performance. Often KPI’s are financial but they can also be non-financial (e.g. number of unique visitors to your web page).

What do I do with a KPI?

KPIs are used to drive performance and measure success. If you are underperforming on a KPI target (for example debtor collection days), then you should act within the business to improve this result to bring you back in line with where you should be. In this simple example you may just devote more time to chasing in debts, offer discounts for earlier payment or even pass older debts to legal for recovery.

What is a 3 way forecast?

This shows the profit and loss, cashflow as well as the balance sheet. A 3 way forecast is the next step on from either just a ‘budget’ or a simple cashflow.

Can you prepare management accounts for me?

Yes we can! You will need to have your basic bookkeeping completed as a starting point which we also offer as a service. From there we can work on your management accounts by visiting your site or carrying out the service remotely.

How do you know what’s going on in my business to prepare management accounts?

We talk to you! Management accounts preparation is a two-way process and we like to keep the dialogue as open as possible. This helps in the accuracy of the numbers which ultimately benefits you more as a client.

Can you review my internally prepared management accounts?

Yes we can and we do for many clients. It is not usual for a ‘second pair of eyes’ to offer a little more objective review of your business position to add further experience and comfort to support your in house team.

Phone

CALL US 01325 349700

Lines open 8.30am-5.00pm Mon-Fri


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