Making important business decisions always come with some element of risk. When should you start offering new products and services? When can you employ another pair of hands? Or when should you start a new marketing campaign?
All of these questions should be answered with informative financial information to hand so you can mitigate those risks and seize business opportunities. And that’s where management accounts come in…
What are management accounts?
A management account is a smaller version of your annual account covering a specific period of time. They can cover any smaller period within your full accounting period, such as each month or each quarter. They provide you with up-to-date financial information about your business.
Is a management account just a profit and loss spreadsheet?
Management accounts are not just like profit and loss spreadsheets that you can download from your chosen accountancy software. They include more refined and detailed information that is bespoke to your business. Thus, you may want to veer away from standard account templates or edit them to make the information presented more detailed and relevant.
Yorkshire Accountancy can assist you in creating bespoke management accounts that meet your business’s accountancy and planning needs. Get in touch with our team to learn more!
What is the purpose of a management account?
The primary goal of management accounts is to provide you with information that can inform timely business decisions. If you don’t have access to detailed financial information at different stages of the year, how can you plan your next move? Will you wait until the end of each tax year or accounting period to make decisions? If so, you could miss out on valuable opportunities throughout those periods.
Having a management account has been compared to sailing a boat to a destination while knowing your exact location. This is compared to not having a management account and sailing to a destination without knowing your current location. The former makes the task of sailing somewhere (or running a business) so much easier.
For example, if you have been considering employing another member of staff, you need to know when it is financially viable to do so. By having management accounts alongside your regular annual accounts, you can understand when you can afford another staff member, and just as importantly, when you cannot.
The benefits of management accounts
The primary benefits of using management accounts are:
- Easy to set up and manage
- Made bespoke to any business
- Can be managed independently or outsourced to bookkeepers
- Created for your preferred time periods
- Easily inform key business decision
- Help to mitigate risks
- Help to maximise opportunities and growth
- Cost-effective solution to multiple business problems
There may be additional benefits in using management accounts that are relevant to specific businesses in certain industries.
Do I need to have management accounts?
There is no tax law that requires your business to keep management accounts. You can choose whether or not to use them. Their purpose is to help business owners and businesses succeed by informing crucial decisions and planning.
They are growing in use among companies of all sizes, and even sole traders and freelancers have started using them to manage their tax liability and student loan repayments in advance.
I want to know more about management accounts
If you still have questions about management accounts, annual accounts and bookkeeping, don’t hesitate to book a discovery call with one of our team. Yorkshire Accountancy is on hand to discuss your tax and business planning needs.