HR Book Keeping

You Do The Business, While We Do The Books

Management Accounts

Management Accounts give the management of the business information to allow them to make decisions for the future of the business, i.e. marketing or sales. They come in the form of recent historical, current and future financial information.

Not every business has the same requirements and there is no legal requirement to produce them. Most businesses will find that management accounts are a financial tool that is used to run the business more effectively.  They give them recent, current and future financial information to allow the business management to make important decisions.

The information in management accounts can be broken down into different areas within the business.  A business usually has more than one product/service that it sells, and each product/service can have a breakdown relating to it.  This would give the business management knowledge of how this product/service compares to all the others and therefore they can make decisions on which product/service should be kept for future sales.

Management accounts are used to compare previous, current and future financial information giving the business the opportunity to change future plans and make the business more flexible

They are used for the following:

If the business has an overdraft or loan, or are looking for such, the bank or lender will usually be looking for management accounts as proof that the business will be able to repay the overdraft or loan.

Recent historical performance is analysed usually using the P & L, and this information is used to help produce the cashflow forecast and the future planning.  The cashflow forecast is used to calculate the expected increase or decrease in cashflow over the coming year or period. 

It is good practice for all owners or directors of a business to know the historical, current and future financial position of the business.  This means they can make informed decisions that are in the best interests of all concerned, the business, employees, other owners or directors and themselves.  This in turn can add value to the business.