Understanding management accounts is important. If you want to measure your business’s financial health, whether it be by sales or profitability, management accounts are a great place to start.
If you own a business, your accounts and bookkeeping should be high on your list of priorities, regardless of your company’s size. But what exactly are management accounts and how are they prepared? To find out everything you need to know about management accounts, continue reading.
Management Accounts Simplified
What are management accounts? Management accounts, also known as management accounting, are important financial reports that are usually completed either monthly or quarterly, providing key information on business performance and financials.
Without such financial reporting, you could struggle to plan effectively for the future. What a business’s management accounts include will vary – this is due to the sector they’re working in and the stage the business is at. However, management accounts typically include:
- Key performance indicators (KPIs) – measuring company growth
- Balance sheet – showing company assets, equity, and liabilities
- Profit and loss statement (P&L) – showing financial statements of business revenue, expenses, profit, and losses
- Cash flow statement – showing financial data regarding cash inflows received by your company
The Benefits of Management Accounts for Businesses
Management accounts are beneficial for several reasons, like helping gain clarity on your business’s financial health. A quality management account system enables you to use KPIs to gain an accurate insight into your business, such as your gross profit and overhead costs.
This makes things easier when it comes to the end-of-year accounts. It can also highlight any areas of improvement and bad practices, allowing you to take action and impose discipline in the necessary areas.
You can control debtors, stock levels, and overhead costs with the information received from management accounts. But what other benefits come with management accounts? Some more key benefits of management accounts include:
- Better processes
- Planning for the future
- Effectively track financial performance
- Monitor growth
- Control costs
- Helping with tax planning
Why You Need Management Accounts
Offering numerous benefits, management accounts help businesses greatly. To successfully grow your business, we recommend management accounts. They allow you to closely monitor your costs throughout the year and measure overall performance.
Checking on your business’s financial performance here and there won’t offer many benefits – keeping track is vital. With management accounts, you have access to key information at any time, allowing you to make the best company decisions and plan growth.
Ultimately, no business should wait until year-end to deal with finances. Although you can create management accounts yourself, it’s advisable to have an accountant do it for you.
This eliminates the risk of issues or confusion occurring – dealing with the financial side of your business can be difficult in some cases, especially if you’re operating on a larger scale. Having an accountant produce management accounts is most advantageous.
Are Management Accounts the Same as Statutory Accounts?
No, management accounts and statutory accounts are not the same. Both management accounts and statutory accounts are commonly used to report on the financial side of a company, but they have some key differences.
By law, statutory accounts need to be submitted by limited companies, whereas management accounts don’t need to be submitted at all. Essentially, management accounts are there to help with decision-making, tracking finances, and bettering your business strategy – they are not a legal requirement.
Account Management at LJS Accounting Services
A typical management account template will include a set of key performance indicators, the cash position, a balance sheet, and a profit and loss statement.
The set of summarised accounting data will include data regarding cash flow and income. One of the main aims of management accounts is to aid strategic decision-making. At LJS Accounting Services, we offer a wide range of services, including accounts.
You can rest assured once you’ve been appointed a dedicated accountant. They’ll look after your end-of-year accounts while aiming to minimise your tax bill. Our team is here to advise, guide, and support you.
You can relax knowing your accounts are being taken care of while you worry about other important aspects of your business. Our accounts service extends to the preparation of management accounts, of which many clients reap the benefits.
To find out more about our services, please get in touch today. We look forward to hearing from you.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.
