Jono Wilson of Barnett & Turner answers some of your questions about management accounts and how they can assist in making your company more efficient and potentially more profitable. I recently visited a client who has been using his traditional accounting methods since he started in business many years ago. As an owner, he is heavily dependent on his finance team and book-keeping staff for information and they were using outdated software. Much of the data the business relied on was entered manually and many records were still in paper form, sitting in filing cabinets. Whilst it is of course key to have a system you know and understand to help you run your business effectively, it made me think about how much progress we’ve made in recent years and how important it is to maintain proper management accounts.
What is the main advantage of keeping management accounts?
Essentially, they’re about being in control of your business and looking to the future. If you want to make proper cash-flow projections, for instance, your working capital requirements or whether you’re likely to exceed an overdraft limit, management accounts are an essential starting point. If you’re a small one-person operation, using Key Performance Indicators (KPIs) rather than full management reports may be enough. But as any business grows, they become essential.
How frequently should they be produced?
We would always recommend quarterly reports at a minimum if you’re a proper trading business, but monthly management accounts are often ideal.
How much time and effort are involved?
There are very few excuses these days for not having management accounts, because there is so much technology out there to help. With cloud software, it’s an easier process than it’s ever been. You can work collaboratively with your accountant, which makes everything more seamless. And of course the integration of automated banking feeds cuts down on a lot of time too.
What will it cost?
Well, there’s obviously a one-off investment in software, but in the longer-term, you may see significant benefits in terms of staff costs. You may be able to outsource more work to your accountant. And, of course, there may be significant gains in terms of visibility within your business.
If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at email@example.com