I recently met with a potential client who proudly told me that he receives monthly management accounts for his business.
Impressed by his confidence, I asked to see these accounts, expecting a detailed analysis of his financial performance.
He handed me a single spreadsheet filled with numbers. It showed last month’s sales, expenses and profitability.
While tracking these metrics certainly put him one step ahead of many other businesses, I couldn’t help but burst his bubble. You see, what he had were not true management accounts. They were what I call “scorekeeping” accounts.
They provided a snapshot of his business at a specific point in time. But they never explain “so what” – ie what do the numbers mean for his business?
You see, true management accounts go beyond the raw numbers. They give you the context you need to understand the significance of the data.
For instance, if your spending is £50,000 this month, is that an increase or decrease compared to the previous month? That could completely change the picture!
And what does the projection for the following month look like – is the trend expected to continue?
Here’s another example. If you made a profit of £70,000 last month, is that better or worse than what was predicted? By how much?
You need to understand trends over time for the numbers to be meaningful.
It’s this context that transforms mere “accounts” into powerful “management accounts” that genuinely help you manage your business better.
By way of comparison, think of a tennis player who recently won a match 6-4, 6-2, 6-4.
That’s the scorecard, the basic snapshot of how the player performed.
But was the rival player higher or lower than him in the rankings? Is this an improvement on his recent performance or a deterioration? If he has spent the last few months trying to improve his backhand, was that working or not?
These are the critical facts you need to grasp the significance of the scores. (At least according to my wife Thelma, who is the real tennis fan in our household! If I’m using tennis metaphors, it’s a sure sign that Wimbledon is just around the corner – and I’m already hearing about it…)
When it comes to your business finances, our Outsourced Finance Department can give you those all-important facts.
When you work with us, you receive monthly management accounts that are more than a jumble of numbers. Our team diligently tracks your Key Performance Indicators (KPIs) and adjusts our reporting every month to include the information that is genuinely useful to you.
You won’t have to interpret the data alone either. We work with you closely to help you understand the “so what” behind the numbers – and make well-informed decisions for your business, as a result.
No more guesswork or incomplete information. We’re here to ensure you have the financial insights you need to grow your business faster and maximise your profit.
To find out more about how we can help you, hit ‘reply’ to this email or phone us on 01279 647 477.
Warmly,
Garry
