How good are your management accounts?
Summary
With good up-to-date financial information you can make sensible decisions, change what’s not working, get early warning of problems and track the results of your business. Anything less than good financial information will hold you back, sometimes disastrously. The minimum information you need in your monthly management accounts is: • Profit & loss for the year-to-date compared to prior year (and forecast if you have one) • Profit & loss by month for the last 12 months • Aged debtors report – in order of largest to smallest debt There may be more detailed reports depending on what type of business you are running but this is a good start. This company has annual sales in the millions of pounds and it reminded me that there are many businesses in the UK of all shapes and sizes that don’t have adequate financial information. The work required to get their management accounts fit for purpose included: • agreeing with the management team what information they needed • making sure all of their bookkeeping accurately and in good time • creating a set of memorised management accounts reports in the accounting software to be run each month and presented to the management team (some of the reports are automated to be sent during the month) • ensuring the accounting information is consistent with information produced by other parts of the business • producing a cashflow model that is updated for the month just gone and looking at least three to six months in to the future It’s pretty straight forward to produce the right financial information to help run and improve your business.