Management accounts are invaluable at providing businesses with information to run their operations and plan for the future. To be of any use to a business they need to be produced in the shortest time possible and be both accurate and informative. Businesses have different needs depending on the size and complexity of their operation, but a set of management accounts can include any or all of the following:
- Profit & loss accounts and Balance sheet, possibly analysed by department / division / subsidiary;
- Actual performance measured against budget;
- Cash-flow projections, and future profit projections;
- Key performance indicators;
- Other information such as debtor turnaround times and staff absence levels.
Some businesses will require their management accounts on a monthly basis, whilst for others quarterly will be sufficient. The accounts should be produced in the format that the owners of the business find easiest to work with. For some this will be a set of standard accounts, others prefer management accounts to be more “visual”, and to contain a number of graphs with a couple of lines of explanatory text attached. Either way, their importance cannot be under-estimated in the successful management of the business.
Management accounts will hopefully provide peace of mind that the business is moving along nicely, but if not they can be a timely pointer of the issues which require addressing.