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Management Accounts

You run a business and by running a business that means paperwork. Lots and lots of paperwork. When do you ever find the time to overlook your accounting data to see potential improvements that can help you greatly in the costs of products and services relating to your business. You could potentially be spending hundreds even thousands on products and services that could be invested into your business!

Here at Auditox, we can assist you in the management of your accounts, finding potential savings and budgets that you can use to inform decisions on how your money is spent within your business. So get in touch today and find out how we can help you and your buisness!

Management-Accounts

Management accounts

There are so many factors that shape success or failure that it can be hard to know what is right. If you are overwhelmed with data or don’t know where to start analysing accurate information, you need help.

Management accounts provide companies with the information to make informed decisions that push their business forward. It is one thing to evaluate your data, but another entirely to create value and working behaviour from this information.

Management accounts are produced throughout the financial year, and they offer firms insight into the financial health of a company. A good management report is easy to comprehend but contains the roadmap for your business's success.

At Auditox Accountancy, we produce management accounts, and we help business owners grow their business. Contact us today to see how management accountancy services will improve your business.

Management accounts

What are management accounts?

Management accounts provide information on what is happening in an organisation. While it is helpful to look at a bank statement and see a healthy cash balance, this isn’t always an indicator that a business is doing well.

A bank statement provides a snapshot of a time, which is helpful but not enough to analyse how the business is doing effectively. A bank balance review offers nothing about trading conditions, upcoming outgoings and how your sales pipeline is looking.

With management accounts, you can closely review your finances and make a more informed judgment on your performance. With this information, you can pinpoint trends in your sales and be better informed about any hopes you have for expansion, diversification and growth.

Many professionals and businesses like to operate on a “gut feeling”, but that can be very damaging. Acceptably analysing information makes it possible to minimise some of the risks involved with significant decisions. Management accounts help businesses lower their risk when making decisions.

What are management accounts?

What is included in management accounts?

For a small business, management accounts will generally contain a:

  • A balance sheet
  • A cash flow statement
  • A short report on the business
  • Profit and loss accounts

If someone in your business has the time, skills and confidence to do this work, there is no reason why a company cannot undertake management accounts work themselves.

However, given the importance of these documents, it is often best left to an expert.

Why you should choose Auditox Accountancy as your management accountants

While hiring a qualified accountant is a cost for your business, it is often one that pays off. There are many benefits associated with our service, which we believe justifies hiring a management accountant in the first place.

Benefits to you of our accounting services include:

  • As we do the work, you have more time to focus on other matters, which can help your business
  • As qualified accountants, we are trained for this work, which improves the chances of accurate work
  • With accurate accounts, you can make better-informed decisions, and you will feel more confident about the information you use
  • Our experience helps us to prepare and beneficially present this information, allowing you to comprehend the work
  • We are always on hand to discuss the work and can explain in more detail if you require it

The success of your business depends on many things, and having the correct information that allows you to see better what comes next is crucial. Management accounting is a critical way of working that enhances your chances of success. We have helped many small businesses, sole traders, entrepreneurs, and large companies, and we are happy to prepare management accounts for you.

What is included in management accounts?

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What is management accounts vs financial accounts?

To someone with no experience in these topics, there might be no or little difference between management accounts and financial accounts. This isn’t the case. There is a significant difference between these two styles.

They are both valuable ways of working but at very different times. If you are keen to know the difference between management accounts and financial accounts, we are always on hand to assist you.

We can also provide these accountancy services for you, so contact us if this is of interest.

What is management accounting?

Management accounting, or managerial accounting as it is sometimes referred to, is a way for directors and managers to run the daily operations of their business better. An interesting feature of managerial accounting is it is based on current and future trends, not on what has already happened. There are many times a business should study past performance in determining what to do next, but not here.

This style of working helps make operational decisions. Examples of decisions where this accounting style helps include replacing computers or setting a price point for a new product.

It is difficult to predict what will come next, but this method creates a platform where firms can minimise the risk in determining what comes next.

What is financial accounting?

Financial accounting is the basis for presenting a business's performance and overall financial health to external parties. The work involved with this accounts style enables critical internal and external stakeholders to see how the firm performed in a stated time.

The company must file financial accounting reports annually. If a firm trades publicly on the stock market, the financial reports must be available to the general public.

What are the main differences between the two?

As you can see above, there are differences between these styles.

A significant difference is who the information is for. With management accounts, the information is for an internal audience. With financial accounting, an external audience is a recipient.

Another significant difference is that financial accounting must be accurate, and conform to Generally Accepted Accounting Principles, otherwise known as GAAP. This isn’t the case with management accounts. Here, estimates commonly feature because exact figures are difficult to obtain, or people predict things that haven’t occurred.

What is management accounts vs financial accounts?

Benefits of management accounts

If you need reasons to follow this style of accounts, such as selling it to other stakeholders or potential clients, here are some of the leading benefits of management accounts.

You have the information you need to grow your business

If you are keen to grow your business, it is best to have information that allows you to make intelligent business decisions. You can never fully predict the future, but if you know how your business is performing and you understand the current market, you have a better chance of making successful decisions.

You can act now, rather than later

Year-end accounts are essential for businesses, and you need to have these accounts for many reasons. However, you lag if you wait until the end of the financial year to review your figures and finances.

With management accounts, you can identify problems or opportunities in real-time. This helps you move quickly, minimising problems or creating more chances to enjoy success.

You stay on top of KPIs

By using key performance indicators correctly, you enhance your chances of business growth. This information drives the business forward, highlights growth areas, and can even boost staff morale levels.

Knowing how your business performs in areas that matter is vital, and with management accounts, you have the information you need to make better business decisions.

Have more control over your cash flow

Cash flow is one of the most important things for a business. If you aren’t controlling how money moves in and out of your organisation, you leave yourself open to danger.

If your business has potential cash flow problems, the sooner you spot them, the better. This is why management accounts make a difference, as they allow you to analyse potential problems and review how money leaves your business.

If you want to find ways to reduce your outgoings without impacting the quality of your overall work, these accounts are the ideal place to start.

If you want to analyse the value for money you receive in working with suppliers, these accounts give you the information you need.

As said above, year-end reports and matters such as total business costs are vital for a business, but they don’t benefit you daily. For a company to prosper in the short term, creating the platform for long-term success, you need to know the minor ins and outs of your finances. This form of accounting is perfect for this style of management.

Prepare for tax and dividend payments

If business owners only worry about tax and dividend payments when year-end accounts are filed, and they pay out money, they risk facing a nasty shock. You can remove this threat by staying up to date with these matters as the year progresses.

Even monthly checks on tax and dividend matters allow you to prepare yourself for payments better.

When a small business pays dividends instead of a salary, they need to stay on top of this matter. These accounts are ideal for managing employment perks like this.

Minimise the likelihood of fraud in your business

All companies should concern themselves with fraud prevention and detection. By regularly reviewing your activities, you leave less room for fraud. When people know you review your business on an ongoing basis, they know irregularities are more likely to be found at short notice.

When it comes to fraud prevention activities, management accounting is a helpful way of working.

Reduce the cost of annual accounts

At Auditox Accountancy, we know the importance of annual accounts. We provide year-end reports and accounting services for clients, and we are happy to provide these services.

However, we appreciate there is a lot of work involved with producing annual accounts. This means there is often a high cost too.

With management accounts, you get all the immediate benefits, and you also find that the work associated with annual accounts is reduced. Management accounts give you what you are looking for if you would rather spread the workload and cost associated with financial reports over the year.

Specific reasons to use management accounts

If you want to have technical reasons to use management accounts, please consider the following reasons:

  • You will have the information you need to analyse the gross margin percentage of your business
  • You can establish break-even points for sales
  • You can explore and improve overhead costs
  • You can measure and improve stock levels
  • You can stay better informed of debtors

If you or your business believe in using KPIs, you know the importance of having vital information at your fingertips. Management accountancy offers this service, and we can provide it for you.

Who uses management accounts?

It might be that you like the benefits associated with management accounts, but you are unsure if it is right for your business. You will find that a broad range of firms and industries use management accounting.

This accounting style is helpful for owners and managers, while investors find them very useful. If your business wants to bring on new investors or reach out for funding, you’ll find management accounts are beneficial.

We believe all companies with significant accounts can benefit from this working style.

Why do firms not use management accounts?

We appreciate there are many reasons why firms currently don’t use management accounts. They might have never considered their options in this field, or they have no interest in this way of working. Some firms might consider themselves too small to benefit from this accounting system. Not every firm needs this level of analysis for their ongoing accounts. Still, you’d be surprised at the number of small companies (under the technical definition of a small business) who benefit from this analysis.

Many firms don’t have a formal accounting system in place, and they might be hesitant over choosing one. There will always be worries about the complexity of such a system and whether it is affordable or viable for a business.

It might even be that a firm is concerned about working with another specialist or external partner as they do enough of that already.

Whatever concerns you have about management accounts, you are not alone. However, the benefits of this accounting style are apparent and could be of significant help to your business.

If you would like to discuss your options, we are happy to help. Auditox Accountancy offers bespoke services tailored to the needs of a company. If we believe management accountancy is a good fit for your company, we will show you why, so get in touch.

Benefits of management accounts

Dealing with key performance indicators

What key performance indicators KPIs can your business use?

If you believe that if you can measure something, then you can manage it, you know the importance of key performance indicators.

It is likely you already measure performance in your business, even if you don’t have a formal process. While it is essential to consider your cash balance, your bank balance, your net profit figure or turnover, you need to know more about your business.

To better measure business performance, you need to consider issues such as:

  • How many customers do we currently sell?
  • How often do customers purchase from us?
  • What is the average value of our transactions?
  • Do we receive referrals, and if we do, how many referrals do we accept?

If you can answer these questions, you have a better idea of how your business is performing.

Business owners can improve sales by knowing their business better

This helps you do more of the things you do well, and if you have flaws, you can change your behaviour on these matters.

We believe key performance indicators are vital for companies, and measuring business performance is the platform for growth and success.

If you need assistance in building the information that allows you to assess your KPIs better, our accountancy solutions will help.

Dealing with key performance indicators

Managing your cash flow statement

Given the importance of cash flow, you need to know how you perform in this area, so a cash flow statement helps. This document contains information relating to a company's money from its ongoing business and any investment sources.

The cash flow statement can be broken down into three sections to create the net cash flow.

  1. Cash flow from operations – money derived from standard business activities
  2. Cash flow from investment – gains or losses from investments
  3. Cash flow from financing – which is money from equity or debt

A cash flow statement is a valuable tool in assessing a company's strength and determining what the future holds for the organisation.

We cannot stress how important this statement is and how the information detailed assists companies develop and grow. If you would like guidance on this matter, please contact Auditox Accountancy, and we will be more than happy to assist you.

Receiving management accounts on a monthly or quarterly basis

They can be produced monthly or quarterly when it comes to management accounts. Having this information on a monthly basis helps firms keep a close eye on their accounts. By opting for a quarterly basis, you have more freedom but still connect regularly to every aspect of your business, others opt for a quarterly basis. There is flexibility in management accounts that can fit with your business. Choosing the right management accountant for your business helps you know what you need to move forward.

If you would like to discuss your options, we are more than happy to arrange an appointment.

A financial report is more than a statutory account

There is no denying statutory accounts are absolutely essential for companies. Of all the financial reports produced for businesses, they are an essential indicator of financial performance. However, with a management account, you can better predict future performance. If you want to optimise profitability, use up to date information.

We help small businesses be more consistent

A management accounts template is helpful for companies. Anything which creates consistency is valuable for firms. If you want to see your cash position quickly, you can do so with a management account. This isn’t the case with statutory accounts.

We know a balance sheet is one of the most critical documents in your business. We appreciate a balance sheet helps you determine the true worth of your business. At the end of the financial year, a balance sheet is essential. In the daily running of your business, balance sheet information isn’t always helpful.

We help business owners make informed decisions

Using a management account doesn’t replace the need for statutory accounts. By reviewing various important financial statements, companies can better assess their financial performance.

If you would like to learn more about financial statements, a management accounts template, and the benefits of professional financial reporting, contact Auditox Accountancy.

Managing your cash flow statement

Choose Auditox Accounting for management accounting

If you are a business owner or on the management team, you cannot overlook the importance of regular management accounts. Regular management accounts can influence the outcome between success and failure for many firms. This is why hiring management accountants makes sense concerning financial data and strategic decision making, and we offer management accounting services to a broad range of firms.

Preparing management accounts is important, and we are happy to provide this service for you.

Choose Auditox Accounting for management accounting

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Management Accounts FAQs

What is included in management accounts?

What is management accounts vs financial accounts?

How do you create a management account?

Management Accounts FAQs

What is included in management accounts?

What is management accounts vs financial accounts?

How do you create a management account?

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