Do You Know the Value of Management Accounts?

To run a successful business, along with a good product or service and the right team and marketing also in place, you need to consider the efficiency of running your business and its status? Do you know what is coming in and going out? Do you know what needs to be paid? What would happen if you had an unexpected immediate expense - would you be able to pay it? These are all very important questions you should ask yourself if you want to run a successful business. This is key information which you need to be aware of and keep tight control of. And here is the answer - Management Accounts.

There are two types of accounts, financial accounts which describe how well your business is doing and a statutory responsibility to be produced and filed at Companies House. There are also Management accounts which help you manage your business and make the key decisions in specific areas such as sales, margins and stock as well as others such as creditors. These accounts can become invaluable especially during the harder times and the recession.

Depending upon your business, each business will have different needs and areas of the business which is important to them. Although there is no legal requirement to prepare management accounts, many companies produce them regularly like monthly or quarterly to keep a tight control on their business status.

Management accounts are usually split into different areas depending on whether you have more than one location, how many products you may be selling, so you can see what areas of your business are performing well and which parts need looking at. Usually management accounts compare results against your budgeted results so you can see how your business is performing overall and what to expect for the time ahead. They should give you an overall impression of what your annual financial accounts are going to look like once completed.

As well as this comparison, management accounts gives you accurate information to compare your resources better, identify any business trends and highlight any variation in your income or spending which may need attention. They can help you plan and control your cash collection, your expenses and stock. All this information can help you in making key decisions such as cost information and pricing, product profitability, marketing activity and keeping a tight control on your finances and forward cashflow requirements. With this information you will be able to analyse how your business is progressing, which areas may need tightening, improving and which areas you may want to develop in and carry out additional marketing etc. You will also be able to monitor your payments in compared to your payments out so you can identify any cashflow problems in good time and be able to make any adjustments that are necessary.

All of this carries great value and management to a successful business in keeping it one step ahead and keeping it evolving and growing and creating more success.