Accurate and reliable management accounts are invaluable in helping you to make timely and meaningful management decisions about your business.
A great accountant will provide reliable and innovative insights into your business performance by not only preparing these accounts for you or providing advice and guidance on how you can prepare them yourself, but also how to interpret and understand the accounts.
No two businesses have exactly the same management accounting needs. It will depend on the business areas that are important to them. Typically, they can include:
- the sales process – including pricing, distribution, work in progress and debtors
- the purchasing process – including stock records, manufacturing and cost of goods sold and
- a fixed asset register – details of all fixed assets, including identification numbers, cost and date of purchase, etc
- employee records including application of awards and entitlement accrual and calculations
There is no legal requirement to prepare Management Accounts, but it is hard to run a business effectively without them.
Most companies produce them regularly – e.g. monthly or quarterly.
Management Accounts analyse recent historical performance and usually include forward-looking elements such as sales, cashflow and profit forecasts. The analysis is usually performed against forecasts and budgets that have been produced at the start of the year.
For businesses selling more than one product, it is advisable to provide a financial breakdown for each product category. This will allow you to ensure that profitable products are not subsidising those that are selling poorly, unless you intentionally promote loss leaders to attract further customers.
Management accounts can also be used to monitor staff performance and KPI’s as required.