Firstly, what are management accounts?
Management accounts are reports that are produced on a regular basis to provide you an idea of how your company is doing financially.
These reports, which should be generated on a regular basis (at least once per month or quarter), are critical to your business operations because they provide insight into your financial situation, confirm that you are on course to achieve your objectives, and warn you of any potential threats.
Yet, a surprising number of businesses neither use nor recognise the value of management accounts.
What are the advantages of using management accounts?
Keeping management accounts will help you understand where your firm is financially and where it needs to go in the future.
They help you assess results so far, foresee potential problems with cash flow, and zero in on what needs fixing so you can boost growth.
Examining your revenue, expenses, and cash flow as well as your assets and debts may help you see trends, forecast your income, and establish reasonable goals. In addition, a solid set of management accounts is usually appreciated by prospective investors since it reveals information about the company’s financial health.
What information is necessary for a management account?
Information that is useful to owners, managers, investors, banks, tax planners, and others could include:
- Cashflow statement – When used in conjunction with a cash flow forecast, a cash flow statement may reveal both the expected future cash balance and the expected loss.
- Balance sheet – This is a rundown of your company’s assets, liabilities (such as debts), and shareholders’ equity (the value of the owners’ financial stake in the business).
- Key Performance Indicators (KPIs) – Key performance indicators (KPIs) are the targets you’re aiming for, such as revenue growth, gross profit margin, inventory turnover, and sales goals.
- Profit and loss statement – Profitability may be determined and monthly income can be analysed in this way.
We hope this has pointed out the key reasons why management accounts are important and beneficial to you and your business. We’ll walk you through the process of putting together monthly or quarterly management accounts and provide you the information and direction you need. Get in touch with us at enquiries@aitaccountants.co.uk
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