Also known as management information reports, management accounts are a valuable asset to any business. Supporting internal teams and managers, as well as external stakeholders, to better understand the financial health of the company.
As part of a business’s account management process, regular management accounts should be prepared, providing detailed information on the business’s current financial position and clearly outlining the company’s performance.
In this post we take a closer look at what management accounts are, benefits, and how to prepare them.
What are management accounts?
Management accounts are regular financial reports that provide detailed information on your company’s current financial position and performance.
These reports are for internal use only and focus on actual performance, not your tax liability.
Helping you to gain more control over the business’s overall financial health, management accounts help to keep businesses on track, proactive in their decision making, and:
- Provides better financial visibility. Allowing you to detect problems sooner, keeping you in complete control.
- Transparency – you can see how the business is performing in real time.
- Faster and more informed decision-making. Planning and strategy are based on facts. Reducing risk.
- Improves cash flow management – helping to manage shortfalls and surpluses better, helping to keep operations flowing.
Management account preparation
There is no set or specific time to produce management accounts; however, they are typically prepared monthly or quarterly and are designed to allow management to monitor progress, check performance against targets and goals, and improve decision-making. They provide a detailed overview of the business’s financial health.
It is this and more that make these reports so vital, as they allow business owners and managers to see opportunities and risks and put things in place to seize these or tackle the challenges before they negatively impact the business.
Often, businesses opt to work with management accounting firms like ourselves to produce management accounts on a regular basis to ensure that there aren’t any nasty surprises, especially by the time a business comes to produce its statutory accounts.
This element of accounting management is not filed with HMRC, but does allow you to spot trends sooner, address potential issues, and make more informed decisions moving forward.
Preparation of monthly management accounts
When it comes to preparing monthly management accounts, it’s important to note that these reports will include:
- Financial statements: reviewing budget vs. actuals and identifying any discrepancies.
- Balance sheets – including company assets, liabilities, and shareholder equity.
- Profit and loss reports – highlighting trends, costs, and sales.
- Cash flow statements – do you have the funds to keep your operations going?
- A brief report/outline focusing on KPIs monitoring financial performance against business goals.
It’s also important to choose the right accounting system to support your management accounts. Look for systems that offer automated solutions, real-time reporting, customisable reporting options, and integration with other tools your business uses, such as payroll and CRM.
Preparing management accounts
Start by collecting all relevant financial data and information that you hold, for example:
Financial data – revenue, expenses, assets, liabilities.
Operational data – sales, production, stock, customer feedback.
Decide on the timeframe for this information and, where possible, cross-reference it with bank records, receipts, and your accounting management software to ensure accuracy.
From here:
Carry out account reconciliations to maintain clear audit trails.
Prepare your profit and loss report – are your profit margins accurate?
Produce your balance sheet, listing assets, liabilities, and equity, i.e., find out what the business is owed in and what it owes out. This can be critical information, as it can highlight whether debtors are increasing, and which strategies you can put in place to improve this.
Prepare cash flow statements. This will show the flow of cash directly in and out of your business, allowing you to spot potential cash flow issues in good time and implement appropriate cash flow strategies.
Add context and insight to all reports with a detailed executive summary. Often, the main and most read part of management accounts, your executive summary, should be a detailed overview of the financial information that the report contains.
Include in the executive summary: sales figures, stock levels, customer satisfaction metrics, budget vs actual figures, forecasts, and trend analysis compared with other periods.
Communicate your management accounts to decision-makers and offer recommendations and areas for improvement; include a SWOT analysis if appropriate.
Management accountant Manchester
Management accounts are more than just internal reports. They are detailed analyses that enable businesses to make informed decisions, improve financial control, and grow sustainably.
However, we know that producing these reports can be incredibly time-intensive – this is where we come in.
At ROCA, we understand the importance of management accounts for businesses across all sectors and sizes.
We use our years of experience and expertise to ensure effectiveness and accuracy, and we comply with the latest accounting standards, saving you time and money.
Offering a range of management accounting services that allow you to gain oversight of your business’s financial status, with insight into your past, present, and future, we produce detailed and accurate management accounts while also offering strategic advice, helping you plan for the future with confidence.
See how we can help add value to your business. Call us today.
