Preparation of management accounts is a core service I offer. But as much as I can testify to the problems they solve, many business owners still say to me “Isn’t this a corporate necessity, but a luxury for SMEs?” Maybe for some, but there are some very powerful real-world benefits to consider. Let’s look at a few.
Everyone internally is on the same page about finance
Every business owner knows that time feels like your enemy, there just aren’t enough hours in the day. We all crave the time to step back, think and analyse more. Your business’ financial position is the one area that you can’t afford NOT to know about, but it’s just as important that this information isn’t siloed with you.
Management accounts provide a concise overview of facts, so whether you’re struggling to convince a co-director about the merits of a crucial purchasing decision or trying to gee up your staff to push harder for sales, being able to show them the reality in numbers is often the best way to referee an argument or justify putting a rocket up someone’s backside!
Knowledge is power
This might seem a slightly intangible benefit, but there is an obvious example of why it’s valuable to have your key financial numbers at your fingertips. Dragon’s Den. We’ve all sat and watched as a budding entrepreneur stumbled over their figures and saw their chances of investment slip away. On the flip side we’ve seen the trace of a smile and a positively raised eyebrow from Peter Jones when someone convinces him they have a rock-solid grasp of where their business is and can go!
The fact is that, amongst business people, proving you have mastery over the crucial area of finance will get you nothing but respect and admiration. It’s not bragging, it’s just demonstrating that you are a credible, savvy business person. That’s contagious, people want to work with people like that. They buy from people like that and they invest in them.
There is genuine ROI to be achieved, in several ways
Having a few less arguments and a bit more status would be nice, but does it justify the cost of producing management accounts? Let’s think about some more tangible value judgements.
- Reduced Year End Audit and Accounting Costs
- Detection of Fraud
- Legitimate reduction of the company’s tax liability
We all recognise that business runs more efficiently when we look after things incrementally throughout the year, rather than leaving things to annual review which then becomes a time-consuming burden that everyone resents.
Some questions to ask yourself
Is my business complex in terms of accounts payable and accounts receivable?
If yes, then management accounts are going to help you a great deal to see what’s really going on.
Is business finance my strong suit?
If not and you find yourself feeling you’re the one left behind in discussing the figures at a board meeting then being able to see a simplified set of KPIs is going to help you.
Is my business in an uncertain period of stability?
If you’re concerned that it wouldn’t take much to put your business into a downward curve then having the reassurance of monthly management accounts means you won’t worry you’re missing a key indicator that it’s time to take action.
Do I always know what’s going on in my own business?
It’s hard to be on top of everything all the time. If you know you’d be more productive and less stressed because you weren’t worrying about unseen, unknown problems then management accounts are one of the easiest ways to achieve that equilibrium. Remember there is not set format, they can be tailored to give you the precise information you need to feel confident about your business performance.
If you’d like to understand more detail about the benefits of management accounts I’ve produced a free e-book packed with useful tips for business owners on how to understand the subject and plan better.
I also welcome the chance to talk to business owners about the subject and help in any way I can. I run a Business Finance Club based in Dorset which meets on a monthly basis and is a friendly forum for business owners and accounting professionals to share knowledge. You’d be most welcome to join us.
Alternatively if you’d just like to chat on a 1-1 basis then please do get in touch.