Financial information is the lifeblood of every business and your management accounts are the key source of the information you need.
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.
So what financial information do you need and how can you get it?
Essential content for your management accounts
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
- Balance sheet
- Cashflow model
There may be more detailed reports depending on what type of business you are running but this is a good start.
And any decent accounting software should be able to produce 1 through 4.
Our experience with cashflow models is to use a spreadsheet. It’s a far more flexible solution than using accounting software.
How to produce the management accounts you need
A company called us recently to say they know they are not getting the financial information they need from their accounting software and could we help them?
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.
If you don’t have what you need at the moment, work on it before it’s too late.Michael @diaryofanomb