Business owners and their management teams face a huge number of decision-making situations on a daily basis, so accurate management accounting is essential for providing insights and business information. Management accounting uses your ongoing business information to produce reports on subjects such as business performance, profits margins and labour utilisation. Using this valuable source of information helps leverage better business deals and increases the profitability and performance of any business.
Unfortunately, running on tight schedules, most small businesses do not have the time to do regular management accounts. Our team of expert accountants always recommend regular management of accounts and here are the reasons why.
Why you should do regular management accounts?
- Management accounts can be produced on a regular basis. Regular management accounts allow management teams to understand the financial status of the business throughout the trading year and ensure there are no hidden surprises at year end when the financial accounts are prepared.
- Use of regular management accounting helps cut the costs of preparing year-end financial accounts, as all figures are maintained on a regular basis.
- Businesses utilising regular management accounting will find it much easier to identify adverse trading conditions at an early stage and put plans in place to rectify the situation. There could be times when a business is operating with a healthy bank balance, yet current trading situations are likely to contribute to huge shortfalls in cash within just a couple of months.
- Where make or buy analysis is utilised, regular management accounts will give the business owners with the tools to ascertain whether it’s more profitable to produce or buy in the components required within the manufacture of the business’s primary product.
- Regular management accounts and costing allows business owners to determine the most profitable customer base and costs out the activities required to produce and service product ranges.
Ultimately, regular management accounting gives any business owner the tools required to grow the business, by way of a variety of information, including budgeting, financial projections and company scorecards before the end of the year.