The value of management accounts

Depending upon the size of your business, they should be prepared on a monthly, bi-monthly or quarterly basis

What should Management Accounts include?

Management accounts should always include a proper balance sheet, not just the balance sheet that falls out of your accounting system at the end of the month. It needs to be prepared at the end of each month/quarter, with revenue cut-off properly, basic accruals and prepayments adjusted and ledgers reconciled/agreed. If the balance sheet works the rest will work.

A profit and loss account almost goes without saying, as well as an analysis of cash flow. A full set of key performance indicators will prove invaluable. You can then see historic and current trends in your business and identify where your profit is really generated.

Why do management accounts need a proper balance sheet?

You can view the true state of your financial affairs at a point in time. A proper balance sheet highlights what is happening in the business and is your early warning signal. Banks will insist on one if you want to borrow money. Without a proper balance sheet you will not be able to easily raise money from investors and if you sell your business, you will not achieve its full value.

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Why should I invest time and money on management accounts?

It really depends on what you are planning to do with your business over the next few years. Even if you do not value management accounts, third parties will. Many of our clients invest between £4,000 to £12,000 every year on the preparation of their management accounts. For most, we would estimate that the return on investment is probably 4 to 5 times, for some it is immeasurable.

For more information

Please contact Andrew Bagley or call us on:

01483 416232