Whether you are a Sole-Trader, Partnership or a limited company. All businesses need good management accounts to measure and improve performance.
There are several benefits including:
Business Control and Cash Flow
Monthly forecasts of Cash flow are fundamental to your business. Depending on your type of business. You are unlikely to be able to raise investment or develop a good relationship with your bank without an accurate assessment.
It is generally recommended that all new businesses should prepare a monthly Cash flow forecast for the first year and an annual forecast for the first five years of business operations.
There are other benefits of forecasting your monthly cash flow:
- An accurate monthly cash flow forecast will allow you to get a clear idea of how your business is doing - and how it is likely to perform in the future
- You will be able to specify times when your business may need additional funding, such as when cash outflow exceeds inflow
- Inconsistencies in performance can be identified, predicted and remedied
- Major new investments can be bedded in and accurately assessed
Monthly Sales review
All businesses compare their sales/turnover in total at the year end with previous year. But is it sufficient for a business manager / director to know that Turnover has increased or decreased in total from previous year?
Part of the management accounts preparation is to provide analysis of sales/turnover on monthly basis, based on Turnover/sales by product or services. Which enables business managers to make informed decision on diverstment or investment in different product lines.
Expense Analysis
Total expenses for the year are no more than a headache for the business managers. As part of the management accounting work, expenses are analysed and categorised, which enables business managers to ascertain whether resources are being misused and over spent or not.
Tax Planning
When up to date information is available, a director/owner can plan with greater confidence when transactions need to be made. This approach may be helpful in legitimately reducing the tax liability of the company, and to maximise the potential benefits by payment of dividends as opposed to salary.
Demonstrate the Owner is in Control
If the owner can demonstrate to the professional people the business has contact with, that there is a complete understanding of what is happening within the business then respect will be gained and the level of comfort in the business relationship will be heightened.
This may be of particular importance in the relationship with the bank manager.
Detection of Fraud
A regular review of the financial performance of the business will increase the possibility of detecting fraud or other malpractices. Simply the longer time gap between financial reviews will allow wrong doings to remain hidden and more difficult to uncover.
Conclusion
The preparation of management accounts will provide a valuable tool on which the business owner can manage the business. Informed decisions can be taken based upon objective data and be taken in a timely manner to enable the business to succeed.
We can either integrate our services with your current finance team or if you wish we can give you a comprehensive service from bookkeeping and management accounts to year end accounts and Tax submitions.
As part of our management accounts services you will receive following:
Monthly Profit and Loss accounts with analysis Year to Date Profit and Loss accounts
A comparison of budget and actual results Aged Debtor Analysis
Cash flow Forecast Profit margins
Expected Outcome of the year If required, a report of all above in plain English
To find out more, to get a quote or to arrange a meeting please call us on 020 77078 7688. If you want to request a call back please click here.
