Management Accounts

Management Accounts

Why choose Freedom in Numbers to help you with management accounts?

Management accounts are business reports that help you understand how your business has performed (essentially looking over what has already happened).

They are important to help you adapt and make necessary changes to your business, and will help it work more effectively moving forward.

But without the right information, how can you be sure that the decisions you are making are right for your business, and are you spotting trends in your sales that you can capitalise on to make more?

Fast growth or sharp decline can be difficult to see just from a set of annual accounts. This is where management accounts come in for you as the owner of your business.

They help drive your strategy ideas and help you identify when you’ll need additional funding.

We have extensive experience with creating custom management accounts packs for business owners. If you’re struggling to get to the information you need, or understand what is best – get in touch and we’ll help!

Management accounts, also referred to as managerial accounting, is used by managers and directors to make decisions regarding the daily operations of a company.

Whether you are simply a single sole trader, or a small business with a team, it is important to keep track of your business funds and performance.

Keeping track of the business’s performance in turn ensures you are keeping track of spending as well as the tax liabilities that you may want to save ahead for.

Poor visibility of your businesses finances can lead to business problems, failure and a great deal of stress for everyone involved.

Don’t panic, we’re here to help!

What are management accounts?

Management accounts are financial reports produced for the business owners and managers, generally monthly or quarterly that report on the performance of the business. 

They normally contain a profit & loss report and a balance sheet, but they can also contain other details such as key performance indicators, and aged receivable balances (who owes you money).

In principle they are similar to year end accounts but are less formal and are personalised to what management want information about.

Why does my business need management accounts?

Management accounts aren’t required by law, and they don’t have to be filed with HMRC – but they’ll put you more in control of your finances, supporting the growth of your business and helping you make key business decisions.

You may also need management accounts if you need to apply for a business loan or other finance product, as the lender may wish to see a monthly breakdown of business activity to judge creditworthiness.

To successfully grow your business, you need to be measuring its performance throughout the year, including monitoring cash flow. That means more than just the occasional glimpse at your bank balance.

Your cash balance is simply the balance at any given date, and fails to consider impending outgoings, the sales in your pipeline or the current trading conditions.

Management accounts help you to identify trends in sales quickly and you will also have better information for planning growth, diversification or expansion. 

What are key performance indicators (KPIs)?

Key performance indicators are measures of activity that demonstrates how effectively a company is achieving key business objectives.

Businesses use KPIs at lots of different levels to evaluate their success at reaching targets.

High-level KPIs may focus on the overall performance of the business such as gross profit, net profit, and increase in sales, while low-level KPIs may focus on processes in departments such as sales and marketing, including the number of prospects in your sales pipeline, or the number of enquiries via your website for instance.

Why choose us for management accounts support?

 

As a business owner, you should know what is happening in your business on a regular basis. Not only to look at the bottom line and what sales are looking like, but also key trends and who owes the business money. 

You’ll also want a rough idea of tax bills ahead of the year end accounts and what cash looks like after you’ve paid your bills.

At Freedom in Numbers, we’re here to support your business, and take away the stress of the administrative side of business, giving you your freedom back.

We offer a monthly fixed fee service that it tailored to your business and will include all the services you’ll need to get started, including dealing with the HMRC on your behalf!

We will save you time and money.

We’re confident that you’ll love our brilliant customer service and have an excellent experience working with us.

Still unsure what everything means?

No problem, we’ve got some FAQ’s that will help answer your questions.

What is included in management accounts?

This depends on where your business is at in it’s lifecycle, what sector it’s in, and the goals that you want to set for the business.

Typically management accounts will include:

  • Key performance indicators (KPIs)
  • Profit & loss report
  • Balance Sheet
  • Cash flow

Whilst these are the usual things to include in a management report, it can be customised to what you want to see and how you want to see it.

We build custom reports in Xero for some of our clients, that reflects the information they want and need to see.

How do I create management accounts in Xero?

Xero has a whole catalogue of reports available to business owners, with management accounts being one of them.

To get to them, simply click ‘Accounting’, and then ‘Reports‘.

We prefer a more custom approach for our clients that makes it easier to understand the figures. This includes key metrics, like gross profit percentage, tracking categories, and custom groupings.

How do I read and understand management accounts?

Reading management accounts can be complicated, and without proper guidance, they simply join the pile of paperwork on your desk.

One tip we often say is to think beyond the accounting details.

Ask yourself – where does my business make its money? Is it a particular service or good sold? If so, are you splitting this out so you can track its activity each month?

How are you monitoring the performance of your team? Some measure activity levels, whilst others may monitor output.

Aim to identify no more than 5 key performance indicators (KPIs) that you would like to monitor. They don’t need to be all financial. Think about other parts of the business too, such as the time taken to pick an item of stock, or how quickly a service can be turned around from the job coming in, to being finished for your customers. 

Freedom in Numbers - Accounting and Business Support

 

We know running a business can be stressful, and sometimes it’s hard to know where to start.

We’d love to hear from you, and help you revolutionise your finance function.

Let us take the stress away, and help you get back to doing what you love.