The first purpose of management accounts is to help you, the owner or business manager, make more informed and superior decisions when running your business. Many would argue that this is the only reason for management accounts. However management accounts are often required by banks or other financial institutions on a monthly or quarterly basis to ensure the continued supply of credit for the business.
Some or all of the following information can be included within the accounts; the accounts can be tailored to your own business requirements:
- Cash Flow Statement
- Balance Sheet
- Profit & Loss
- Wages/ Tax, NI contributions
- Creditors, Debtors – payments due in and out
- Sales analysis and stock if required
- Fixed asset register
- Costing information, including break-even turnover levels
Having all of the above information at your fingertips every month allows you to plan better, rather than waiting until year end accounts are produced to see where exactly your business spent and where the greatest revenues came from.
Management accounts are a forward looking planning tool for your business enabling you to react quicker to changing circumstances and market conditions. They allow you to plan your cash flow, sales and profit forecast. The accounts make it easy to compare month on month or quarter on quarter progress and highlight issues before they become critical.
If you have more than one outlet or sales channel it is advisable to break these down to enable proper controls for all. The same is advised for product categories, breaking out products ensures that no one product is subsidising any other loss making product, unless you are running loss leaders. Management accounts will help you compare forecasted budgets with actual income or spending and quickly identify trends in your business.
At Gilmour & Co we have been working in partnership with our clients for more than twenty years to ensure you have the best management and financial information. Contact or call us and come in for a chat to find out how we can help your business.