Many businesses are advised to produce management accounts but how many see the benefits?
Does this sound familiar?
The accounting team have diligently prepared the management accounts. They have spent the last week working 60 hours a week, they have reconciled all of the bank accounts, they have counted & adjusted for the stock figures, they have accounted for amounts recoverable on contract, they have accrued for costs yet to be invoiced and adjusted for prepaid expenses. They have even prepared a shiny bound pack of information and delivered it to your desk. You look at the pack either when it arrived or at the monthly meeting. Finally the pack gets left on a dusty shelf or filed away never to be seen again.
Management accounts are something that a lot of business owners feel that they should have but don’t quite know why. We explore the top 5 signs that your management accounts are not doing as much as they should.
The management accounts are still in pristine condition
No notes were made on the accounts, no actions taken or comments made on the variances.
If the management accounts are not being used to spark discussion or make informed decisions then why bother?
The time lag between the period and the management accounts is more than 4 weeks
By preparing the management accounts this late, the usefulness is diminished. The main advantage of management accounts over statutory accounts is their timeliness and the ability to make decisions immediately in the period and not six months after the period has ended.
Be realistic about the time it takes to prepare the accounts, but also the resources available to prepare the management accounts. Relevant and timely management accounts prepared quarterly will be of more use than late, irrelevant monthly management accounts.
The management accounts are 100% accurate
By ensuring the management accounts are correct to the penny, the accounting team will have worked hard and no doubt expended a lot of time and energy. If the accounts are not late (see point above) then the accounting team will be spent! It’s important to consider what the management accounts are going to be used for. Are decisions being made where it is imperative to be correct to the penny?
Set realistic deadlines and agree key areas where the majority of work will be carried out; the £100,000 stock balance may just be more important than that £10 car tax prepayment.
A decision has never been made by using the management accounts
If they have never been used to assist in the decision making process then why prepare them at all? Just to get a feeling of how the year’s going?
Maybe the information prepared is not adequate or relevant, identify what would help and work to get that included.
There’s no summary page
Again, going back to the purpose of the management accounts, if you’ve got to dig through all of the detailed pages to find useful data then it is unlikely that important information is given the status it requires. A lot of managers will not search the management accounts for the detail, they are usually too busy.
Try using a one page summary. Just the key information is displayed on this page, the detail is held behind.
This blog was written by Shane Cann, an Associate at Bush & Co Chartered Accountants, he is based in Exeter. If you’d like to discuss your management accounts then we’d be delighted to hear from you. Contact Shane on 01392 432525 or firstname.lastname@example.org
Image courtesy of https://www.flickr.com/photos/tomsaint/
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