Management Accounts
What are Management Accounts?
“Knowledge is knowing that a tomato is a fruit. Wisdom is knowing not to put it in a fruit salad.” – Brian O’Driscoll, Captain, Ireland and British & Irish Lions
When it comes to your business finances, you gain knowledge by having reliable financial records. And reliability comes from good quality bookkeeping, delivered as close to the date of the transaction as possible. So having your VAT and tax returns prepared by a qualified accountant means you can trust your numbers.
Wisdom, on the other hand, comes from analysing and interpreting those numbers. That’s the point of management accounts — they’re created specifically for you, to help you make decisions.
Why Businesses Use Management Accounts
Management accounts help you to:
- Compare this year’s results to last year’s
- See how your actual results compare to your forecast
- Segment your results by customer group, location, service line, etc.
We can help you do this using account codes, Xero’s tracking categories, or a combination of them both. We also create bespoke reports and support clients by introducing software tools like Syft and Float.
We’ll also help you make the right accounting adjustments — like accruals, prepayments, and accrued or deferred income.
For example, we have a client that receives a large annual insurance bill. If you looked at their results for that one month, it would seem like the business is struggling. It’s not — it’s a superstar. We apply the correct accounting principles to spread that cost across the year. Hey presto: a true picture of their performance. Another of our clients pays team bonuses a month in arrears. We apply the principle of matching by recognising the bonus cost in the same month as the income that triggered it.
Looking Forward, Not Just Backwards
Whilst management accounts mostly look at what has already happened, they give business owners what they need to plan for what comes next. Often that includes:
- Sales forecasts
- Budgets for operating costs
- Scenario modelling
We build these from the bottom up, going deep into the details of your business. Because we’re already close to your numbers (and know your business well) we can add valuable insight into your cost drivers and interdependencies.
Cash is King – It’s not just a saying!
“Turnover is vanity, profit is sanity — but cash is king.”
Late in 2024, the Financial Times reported on a CB Insights survey of 483 business failures in the US. Running out of cash was the top reason. The same is true here in the UK. That’s according to both the Small Business Commissioner and the National Institute of Economic and Social Research (NIESR). Poor financial management and lack of access to finance are always first on the list of reasons businesses fail.
What We Do to Help
We help business owners identify the risk areas that could threaten their success. This gives us the information we need to work with them to implement better processes and controls. This might include:
- Regular debtor reviews
- Outsourcing credit control to us
- More flexible customer payment platforms
- Integrated cash flow models
With the right tools in place, you can plan for growth and prepare for future financial needs — before they hit. If your business needs to borrow or raise finance, having time to plan gives you better options. Last-minute finance is always more expensive.
And don’t forget tax. Your cash flow needs to include tax bills too. We like this quote from Rob Moore:
“Turnover is vanity, profit is sanity — and after tax is the reality.”
It’s All Connected
Bringing us in to help with your management accounts, your cash flow forecasting, and your financial processes means bringing in everything we know. It’s not just about knowing tax and compliance but about knowing your business. It’s not just about reporting the numbers — it’s about using them wisely.
Get in touch with us to see how we can help. Call us on 01403 780858 or send us a message.
