Unless you work in the magical world of bookkeeping services, like 123 Easy Books, you may have asked yourself, “What are management accounts, and what are they used for?” Management accounts are one of those phrases that, as a business owner, you know are important, but may not know exactly why. Well never fear! As well as providing the best bookkeeping services, CIS returns online, VAT returns and payroll services Essex has to offer, we also provide professional management account solutions. So in this blog, we will tell you exactly what management accounts are, what they are used for and why they are so important for every business, regardless of size or number of employees!
What are management accounts?
In its simplest form, management accounts are the financial reports that are produced for business owners, and/or for managers and senior management. Management accounts include a balance sheet and a profit/loss report and are generally sent either on a monthly or quarterly basis. Basically, they are very similar to the end-of-year accounts, but are not quite as formal and are more personalised to that business’s requirements. Typically, they are produced by a team that offers professional bookkeeping services (like 123 Easy Books, cough cough). Regular and accurate management accounts are essential to really getting to the bottom of how each and every part of a business is performing, month on month and year on year. This information can be critical in shaping future financial decisions.
As the provider of expert bookkeeping services it surprised us to learn that there are over 5 million registered businesses in the UK, and of those a huge 98% have 20 or less employees. And of those 98%, only a fraction have regular management accounts. Why? Well, some businesses believe they are too small to worry about it, have never really considered the benefits, perceive management accounts as unnecessary or just believe it’s another expense that they can do without. But as providers of professional bookkeeping services, we know that these businesses are missing out on crucial financial information that could transform their business.
Why are management accounts important?
Just look at it this way, if you want to successfully grow a business then you need to accurately monitor your finances and measure the business’s performance throughout the year, not just by using your end-of-year accounts. Just glimpsing at your current bank balance isn’t always enough, as a healthy bank balance doesn’t always equate to a healthy business. When randomly checking a bank balance all you are really doing is seeing a snapshot of your finances at that precise moment. This does not show you any impending outgoings or trading conditions, or more importantly, the state of your sales pipeline and how that may change from month to month.
Management accounts can provide accurate information on all of this information so that you can quickly identify sales trends, as well as provide the information that will help growth, expansion and diversification. Without this critical information, you are literally basing any financial decisions on a wild guess or gut feeling. As the provider of professional bookkeeping services, it may not surprise you to learn that we would firmly advise against taking wild guesses or using gut feelings when it comes to making financial decisions for your business.
Other benefits of management accounts
There are many other benefits of accurate and regular management accounts. They help you make a more informed decision and take appropriate actions based on accurate, up-to-date information. You can more accurately measure the performance of each area of your business, as well as specific individuals. Management accounts can provide a basis for the reporting of KPIs. They can also help you gain control over your business’s cash flow so you can spot cash flow issues before they arise and analyse any money going out of the business. By seeing exactly how and where money is being spent you can potentially save your company money. Another great benefit of management accounts is they help you to plan your tax and/or dividend payments. Our expert bookkeeping services can help you with this! Finally, management accounts can also help detect any fraud that may be taking place within your business. As a business owner, the last thing you want is for fraudulent activity to be taking place right under your nose.
Expert management accounts, bookkeeping services and more!
Hopefully, you now have a better understanding of management accounts and why they are so important for every business, regardless of size. If you have any further questions on how our management accounts solutions can help drive your business forward, contact our friendly team. Alternatively, if you want to learn more about our professional bookkeeping services, VAT returns, CIS returns online or the best payroll services Essex has to offer, contact us for more information.
123 Easy Books, big enough to specialise, small enough to personalise.
