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For any size business monthly or quarterly management accounts are very important in keeping the business up to date with how they are performing and monitoring their finances.
This “real time” financial data can be deemed as being more useful than yearly accounts in making accurate business decisions as it is based on current figures. We will produce monthly Profit & Loss accounts, Balance sheets and cash flow statements that will show you the “Financial health” of your company. This information can be analysed and interpreted in other ways to provide you with correct, timely information that will be a major benefit in helping you make day to day business decisions. People underestimate the importance of up to date financial information but without the correct data on which to base decisions, business opportunities can be missed and poor decisions made. Some of the key areas are;
- Sales: comparing sales figures against previous months. Identify trends, areas of weakness and opportunity.
- Debtors: monitoring by month, sped of payments, discount incentives and the affect these have on cash flow. Identifying ways to collect money more efficiently and quickly.
- Creditors: monitoring the level of creditors by month, payment terms, discount incentives taken up and the affect on cash flow. Optimising payment terms to facilitate increased cash flow.
- Purchases: monitor levels of spending in key areas of expenditure. Highlight areas of concern.
- Investments: monitor levels of investment, optimising the company’s cash flow and identifying areas of opportunity.
It is however important to monitor the key figures as soon after month end as possible to highlight areas of weakness such as high levels of expenditure in certain areas, unprofitable product lines and poor cash flow and conversely areas of opportunity such as positive trends, increasing turnover or profit.
The most important reason businesses should have management accounts as well as yearly accounts is because it could be disastrous for a company to find out at the end of a year that problems have occurred but gone undetected or obvious opportunities unexplored. By monitoring financial performance, this can be avoided. This then puts you in control of the direction your business.
For a free initial consultation please contact us:
Email. accounting@accountingforthefuture.co.uk
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