A new client of ours was puzzled.
The management accounts he had been receiving from his previous accountant simply didn’t make sense.
He believed certain parts of his business were performing well, while others were struggling.
The numbers told a completely different story.
For more than a year, he questioned his own judgement. Had he misunderstood his business? Was his instinct wrong?
Then he started working with us.
It didn’t take long to spot the problem.
His previous accounts were incomplete. Some important adjustments hadn’t been made and certain areas – including work in progress – weren’t being accounted for correctly.
Once we corrected those issues, everything changed. The numbers finally reflected what he had been seeing in the business all along.
“It’s like someone’s switched the light on,” he told me.
That comment has always stayed with me because it highlights something every business owner should know.
Your management accounts shouldn’t come as a complete surprise.
Over time, you’ll develop a strong instinct for how your business is performing. The numbers shouldn’t fight that instinct. They should explain it.
So if your accounts consistently tell a story that doesn’t match what’s happening on the ground, don’t automatically assume your instinct is wrong.
As I mentioned in my last email, preparing management accounts involves judgement. They aren’t simply objective facts.
Your accountant has to make decisions about what to include, when to recognise income and costs, how to account for work in progress, how to value stock and much more.
The same business can legitimately produce different sets of management accounts depending on those decisions.
That’s why it’s so important that your accountant genuinely understands your business.
Take stock as an example.
Imagine your system says you’re holding £100,000 worth of stock.
But in reality, some of that stock has become obsolete, damaged or simply isn’t there anymore.
If nobody understands what’s actually happening in the business, your accounts could overstate both your assets and your profit.
But an accountant who knows your business, understands your products and regularly talks to your team is far more likely to spot those issues and make the right adjustments.
The result?
Management accounts that reflect reality.
And when your numbers reflect reality, you can make better decisions with far greater confidence.
That’s why we invest so much time getting to know our clients and understanding exactly how their businesses work.
We don’t just review the numbers. We work to understand the business behind them.
We learn how your projects are delivered, how your customers buy, when your costs are incurred, how your operations run and what is really happening behind the scenes.
Only then can we make the informed judgements needed to produce management accounts that genuinely reflect your business – and give you the confidence to make better decisions.
Do your accountants really take the time to understand your business? Or do they simply process transactions and produce reports?
Because at the end of the day, management accounts aren’t just about measuring your business. They’re about helping you run it better. And you can’t do that if the numbers don’t reflect what’s really going on.
If you’re looking for accountants who will take the time to truly understand your business – and produce management information you can actually trust – we’d love to talk to you.
At Insight Associates, we work with ambitious businesses turning over £1m+ to improve financial visibility, strengthen profitability and support sustainable growth.
Simply email garry@insightassociates.co.uk or call us on 01279 647 447 for a no-obligation conversation with myself or one of our specialists.
Warmly,
Garry
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