If it's good enough for PLC's it must be good enough for you
Without a doubt, these are the most powerful accounts any business can receive. They are required timeously, frequently (monthly or quarterly), and contain much more than the annual accounts. Management accounts are designed for the management only, and help drive their business forward, massively! Every PLC has a Management Accounting department, and in most, this is the leading accounting department. Board meetings only take place once these accounts are provided to the directors, and not only tell them how they have done so far, but how they did it, how to improve it, and what they should, and could, achieve going forward. They are a decision making tool, and effectively pay for themselves, with the potential to do much more than just that!
Typically, they include the profit and loss to date, and a forecast of the likely outcome for the current year, together with the balance sheet, and KPI’s (key performance indicators) for the business, benchmarking, cash flow forecasting, and a narrative extracting the most important issues at that time. They can include much more of course, and most SME’s will require some of the above, but perhaps not all, depending upon their size.
Does my business really need them?
Businesses do not need to be incorporated before they need management accounts, but any business with more than say £100, 000 annual turnover should start to consider whether they should seek the benefit of management accounts, and once £200,000 is breached, we believe it to be essential. Obviously larger companies enjoy greater opportunity for improvement, but frankly, if even small companies were able to access more information about how they are performing, whilst there is still time to act to improve it, the economy as a whole would be much stronger, and individual businesses more robust and profitable.
But I'm no good with numbers!
Management Accounts are also designed for consumption by non-financial managers, and so are written in a language easily understood by anyone, whether accustomed to using numbers or not. The Management Accountants job is to interpret, inform, and predict in a palatable format.
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