When it comes to management accounts, these are some common questions I’m asked:
- What goes into my Management Accounts?
- Who needs to see my Management Accounts?
- How often should they be produced?
- What format should they take?
- Who produces my Managment Accounts?
WHAT ARE MANAGEMENT ACCOUNTS?
Management accounts are, put simply, a periodic picture of your business. We’ll get into the detail of what they could contain in just a moment. They are not required legally and don’t need to be filed with any authority.
“So why, when they’re not required, would you want to spend time on having them created?”
Great question. The answer is because they can be the best planning tool you didn’t know you needed. And because they’re not a legal requirement they can take any format that works for YOU. Imagine how much easier it would be to answer those questions from your team or your accountant if you had up to date detail in an easy to read document each month.
WHAT GOES IN MY MANAGEMENT ACCOUNTS?
Running the risk of repeating myself here – it’s up to YOU. However, there are a few things that definitely should be included:
- Previous period Profit & Loss account
- Balance sheet
- Cash Forecast
Whilst these three items will be in every set of Management Accounts there are so many other additions to make them a truly useful document each month. Some further examples of useful information include:
- Stock report – do you need to plan a re-stock in advance?
- Product sales breakdown – what products sold best in the last period?
- Upsell detail – %s of customers who bought the upsell
- Traffic data – how much website traffic did you have?
- Conversion data – website – cart %, cart – purchase %
- Paid advertising returns breakdown
And these are only a sample of what you could include in your Management Accounts. You can add (or emit) whatever is or isn’t important to your business.
WHO SEES MY MANAGEMENT ACCOUNTS?
Can you guess? Because I know I’m repeating myself – it’s up to YOU.
Perhaps you have department managers that you share this detail with. Maybe your accountants receive a report from you throughout the year. Or perhaps your bank manager would find them useful when discussing your banking facilities? Or maybe you show no-one.
It’s your business, your decision.
HOW OFTEN SHOULD MANAGEMENT ACCOUNTS BE PRODUCED?
OK, I’m getting predictable now, right? It’s up to YOU.
The most common answer is one per month. After a month has been completed and all paperwork is logged, the Management Accounts can be produced and issued. A smaller business may only want these reports once a quarter.
WHAT FORMAT SHOULD THEY TAKE?
Again, it’s up to YOU.
Do you prefer visual data? Are spreadsheets your best friend? Do you like all the detail? Are headline numbers what you want to see?
Include charts and images if visual impact is your thing. Use these to show comparisons clearly and simply. Include an overview as well as the detail if you want an ‘at a glance’ view.
There are so many options available to use so go with what works best for you.
WHO PRODUCES MY MANAGEMENT ACCOUNTS?
Most accounting software will produce the basic three items (the P&L, the Balance Sheet and the Cash Forecast). The additional extras will come from any of your daily working systems.
Perhaps different people pull together different parts of the overall report? Or perhaps one person has all the overview required. Or perhaps it’s something you consider outsourcing?
By outsourcing the Management Accounts, you get a fresh pair of eyes without any influencing judgement to provide a really clear picture of your business. Money well spent for any business owner.
You get to make all the choices about your Management Accounts. If you want some help with making those choices, or someone to prepare them for you, The Numbers Assistant is here to help. Book a FREE 15 minute call to discuss your needs and we’ll make the Management Accounts of your dreams a reality.