How can I make best use of management accounts?
As a business owner, the financial health of your company plays a key part in every decision you make.
Management accounts are a great way to review the financial standing of your company, allowing you to make any necessary alterations and place your attention where it is needed most.
So, how can you maximise these reports and utilise them to aid business growth?
Tailor to your business
Simply put, management accounts will work best when they have been tailored to the needs of your individual business.
No company is the same, so think about what works for you and adapt your management accounts to suit this.
Key Performance Indicators (KPIs)
KPIs are commonly included in management accounts. The goal with these is to determine which areas your business is performing best in.
This allows you to monitor success, as well as establish where improvement is needed.
By utilising KPIs, you can calculate how much time it is taking you to reach your goals, and if it is feasible.
The type of KPIs you might wish to include in your management accounts include:
- Employee performance
- Customer/client invoicing
- Departmental performance.
Profit and Loss
A profit and loss statement should be contained within your management accounts, as this details the profits and expenses you have occurred in your business.
By doing so, you can evaluate where you are making money, as opposed to where you are losing it.
Your profit and loss statement may include:
- Comparison
- Departmental assessment
- Rates of sales
- Gross profit margins.
Balance Sheet
A balance sheet is a useful snapshot of the financial health of your business at any one time. This is typically comprised of assets, current liabilities, and sources of finance.
Understanding the importance of what your business owns against how much it owes will help you effectively handle your debts.
Keep an eye out for the next blog in our series, where we will answer the question “How can I read a set of management accounts?”
For help and advice, contact us today.
