Preparing management accounts allow management and other stakeholders to assess the profitability, position and cash flow of the company. With these reports, it’s possible for managers to build up a picture of the business over time.
What is Included in Management Accounts?
A board or senior management team may require a management accountant or chief accountant to facilitate preparation of monthly management accounts. They should produce a monthly profit and loss account, which can be standalone or part of a pack which can also include a balance sheet and cash flow statement. These accounts should give the members an overview of where the company stands and how it measures up to the projected earnings over the course of the year.
Other useful reports can also be included within this pack. The income statement is the primary focus of the pack, but specific activities, strategies and revenues can also be included. These can be used to give the income statement more context within the terms of the business.
Preparation of Monthly Management Accounts
Now, let’s get down to how to prepare management accounts. Preparation of reports will vary slightly based on the accounting system that you use, as some will allow you to export this information easier than others.
Collating the profit and loss of the business on a monthly basis can be simple if all information is stored in a central system. From there, it’s possible to export this information into a handy sheet in a logical order.
The supporting information that you choose to include can be more challenging to pull together. Working with an accountant can be beneficial to help you understand what information is relevant. They can provide another perspective on what management would like to see and where supporting information may be useful.
Working within the same accounting system, you can also pull other information like debtors, historical figures and forecasts. From there, you may wish to work with other departments and managers to assess their Key Performance Indicators and how they are progressing towards them. In so doing it will give your management accounts reports another facet, as they don’t just focus on the numbers.
The Benefits of Preparing Management Accounts
Preparing management accounts may seem like a lot of work to undertake each month, but there are a lot of benefits to preparing said accounts. It gives a better understanding all round of what the business is doing and where improvements need to be implemented. It can also act as an incentive for department leaders to increase the performance of their staff going forward.
Building up this picture for yourself and management can also help with strategy. When you know where and how the money is leaving the business, you can plug this to make the business more profitable.
If you want to work with talented chartered accountants that can help you push your business to the next level, then get in touch with the team at Profile, Chartered Accountants today.