The Exciting World of Management Accounts

24th March 2017

What are management accounts?

In short, Management accounts are the holy grail of leading a successful business.

They contain essential information about your business and help you make informed decisions.

The clue is in the title. They are called Management Accounts for a reason… because they help you manage your business.

Good management accounts give you context about your business. They should give you enough detail so you really understand what’s going and can help you make decisions. Most importantly they should be presented in easily digestible ways.

What’s the difference between management accounts and financial accounts?

Management accounts are used by the management of the business.

They contain sensitive data. You keep them within the business and keep them very secret.

Whereas financial accounts are the ones that are published publicly. That people can get hold of at companies house. They’re really just about score keeping. They tell you what’s happened in the past and that’s about all.

What should management accounts contain?

For your management accounts to give you a true picture of your business the minimum they should have is:

  1. Commentary – This should outline the main things in the accounts which are important to look at. They give you pointers and highlight the areas needing attention.
  2. KPI’s – Key Performance Indicators – Every business has them. What are yours? Make sure they are really highlighted in your management accounts.
  3. Your profit and loss account – look at the year to date, the month, compared to budget, compared to last year, compared to a rolling year. Look at trends in your profit and loss as well as what is happening now.
  4. Relevant sales information – What are you selling, who are you selling it to and how much margin are you making on each one?
  5. Overhead – Detailed information about where you are spending your money and enough information so you can take some action.
  6. The Balance Sheet – That’s a whole story in itself but don’t forget to look at it. It tells you where all the cash is tied up in your business.
  7. Cashflow Report – This shows you the movement of cash in your business.

Here’s the test…Do you have the holy grail of leading a successful business. Do you have quality accounts that help you make good decisions?

Or do you have nothing at all? Which is just a poison chalice!


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