Did you know that it’s very simple to track business growth? Using management accounts, your business can have access to valuable insights that will increase revenue and business growth.
WHAT IS MANAGEMENT ACCOUNTS?
Management accounting is a discipline that involves generating and presenting financial and non-financial information to aid managerial decision-making within an organization. While there is no universally agreed-upon set of principles for management accounting, there are several key principles and concepts that are commonly followed.
THE BENEFITS OF MANAGEMENT ACCOUNTS
Management accounts allow you to have access to detailed information of the operations of your business. The analytic report usually contains vital information such as the cash flow, the profit and loss position and the financial operations. Without a full grasp of how your business is performing, you might not spot if something isn’t going well and then fail to make the necessary changes. Analyzing the data in management accounts arms the decision makers in a business with the information they need to steer it in the right direction.
The benefits of management accounts include:
• Making more informed decisions based on up-to-date info
• Measure performance of your business and individuals
• Gain control over your cash flow
• Plan your tax and dividend payments
• Detect fraud in your business
• Reduce annual accounting costs
WHAT SHOULD YOU INCLUDE IN MANAGEMENT ACCOUNTS?
When creating a report for management accounts there are some key focus points that you’d need to indicate in the report such as:
Key Performance Indicators (KPI’s)
A KPI (Key Performance Indicator) is an analytic strategy to measure your business activities and performances. They can be financial and performance based.
Areas you might want to focus on include:
• growth in sales
• gross profit margin
• cash flow
• number of customers
• customer satisfaction levels
• number of sales leads
Cash Position
It’s vital that you monitor your business’ cash flow to ensure you don’t run out of money. Include in your management accounts a summary of how much cash is flowing in and out of your business in the period the accounts cover
You need to know this when making any investment decisions. It will also indicate whether you need to access funding. Use your management accounts to analyze this data for patterns such as how long it takes clients to settle invoices.
All this will help you to create a cash flow forecast which sets out how much cash is expected to enter and exit the business during future periods.
Balance Sheet
A balance sheet shows the financial health of your business at a given point in time. It includes the business’ assets, liabilities, and owner’s equity. This helps you to understand how much your business owns compared to how much it owes and to what extent you can pay your debts.
Profit and Loss (P&L) Statement
A profit and loss statement, also known as an income statement, is one of the financial statements of a company and shows the company’s revenues and expenses during a particular period.
It outlines your revenue, direct costs and expenses. Subtracting all expenditure from income will show your business’ net profit or loss.
Management accounts can include a P&L for different departments or locations to show which are performing the best. You can also compare your P&L actuals to forecasts or industry benchmarks and adjust if necessary.
ROBLEY BAYNES MANAGEMENT ACCOUNTING SERVICES
Management accounts may also provide deeper analysis of specific areas of the business or non-financial information. For example, they may concentrate on the performance of a particular project, product, location or department. They may also include employee numbers, productivity levels, volumes of unit sales, customer complaints, numbers of new/lost customers etc.
Robley Baynes arms you with the information you need to make the best decisions about where to take your business. Contact us today to get started on your financial journey with our expertise provided first hand to you, call us at 1 868 293-1508 or email service@robleybaynes.com today.