Management accounts differ from a regular set of accounts in that they provide up-to-date financial information as and when you need it, rather than once a year in your annual accounts.
Every limited company must file a set of accounts with companies house following the end of each financial year. This is a statutory requirement, though we believe it shouldn’t be seen as just a box-ticking exercise. A set of accounts can provide you with valuable information about your company and its performance, allowing you to make better decisions and plan for the future.
The benefits can be limited, however, if you only see a set of accounts once a year. Many companies (small, medium & large) will engage an accountant or employ one to produce monthly management accounts.
For smaller companies looking to control spending, this may seem like adding an unnecessary cost, but the benefits nearly always outweigh the expense. Here are our top ten reasons why:
- Allows you to continually review and improve – by having access to current financial figures you can ensure you are proactive in meeting your targets and making commercial decisions.
- Helps to plan dividend payments and other remuneration – plan the most tax-efficient remuneration package
- Can be used to monitor working capital – management accounts make it easy to monitor how much your customers owe you, how much you owe creditors, and of the monthly movements in those figures.
- Helps with cash planning – no nasty surprises on your year-end! Monthly accounts will make it easy to identify problems or gaps in funding quickly so that you can look for external funding or reduce costs before the problem becomes critical.
- Helps to control costs – a monthly set of accounts makes it easy to compare costs month to month.
- Can compare to budgets and forecasts – Budgets and forecasts can easily be integrated into management accounts, providing a visual aid to easily see the specific causes of any variances.
- Helps to identify seasonal differences – monthly accounts allow you to track and analyse every individual month so that you can clearly see the impact of seasonality and better plan for the next year.
- Can send to banks and other lenders – if you are looking to raise finance, an up-to-date set of accounts can be hugely beneficial in securing funding.
- Can be sent to suppliers to help obtain credit – often suppliers may accept a set of management accounts to give or extend credit terms.
- Helps motivate and focus those that they are shared with – it can sometimes be helpful to share accounts with key members of staff so that they can easily see the reason why they need to reduce costs or increase sales.
This is by no means an exhaustive list, there are many more benefits to incorporating monthly management accounts into your business. To start realising the benefits yourself, get in touch.
We don’t just hand over the figures and let you get on with it. We work with you to understand what the data is telling you and help you to draw practical conclusions.