Running a successful business means more than just looking at your year end figures. To make informed decisions and maintain control over your finances, it's essential to have up to date financial information available throughout the year. This is where management accounts come in.
What are management accounts?
Management accounts are financial reports prepared monthly or quarterly that give business owners and directors a clearer view of their company's financial performance. Unlike annual accounts prepared for HMRC and Companies House, management accounts are for internal use. They typically include a profit and loss report, balance sheet, aged debtors and creditors, cash flow forecasts, and tailored performance metrics specific to your business.
Produced regularly, these accounts offer a real-time snapshot of how your business is performing, allowing you to identify trends, flag issues early, and make better strategic decisions.
The benefits of monthly management accounts
Many small business owners and directors rely on bank statements or their bookkeeping software to understand how their business is doing. While this can provide a general overview, it lacks the depth and detail to manage a business properly. Here's how producing management accounts every month can make a significant difference:
1. Track income and expenses in real time
Monthly Management accounts allow you to track income and expenses with far more precision. Instead of waiting until the end of the year to see how profitable your business is, you'll have regular updates to help you keep an eye on where your money is coming from and where it's going.
This is especially useful for identifying unnecessary costs, monitoring margins, and ensuring your pricing remains profitable.
2. Identify unpaid invoices promptly
Unpaid invoices can have a massive impact on your cash flow. Monthly management accounts include aged debtor reports showing which customers still owe you money and how long those invoices have been outstanding.
By identifying unpaid invoices promptly, you can take faster action to recover debts, improve customer payment behaviours, and ultimately protect your cash flow.
3. Improve your cash flow
Good cash flow management is vital for the success of your business. With monthly management accounts, you can better forecast your cash position and plan for the future. You'll be able to anticipate when money is coming in and going out, allowing you to avoid unnecessary overdraft charges or missed payments.
This regular insight helps you make smarter spending decisions and ensures you're in a strong position to invest when opportunities arise.
4. Handle seasonal fluctuations more effectively
For many businesses, trade varies throughout the year. If you operate in an industry with seasonal highs and lows, such as construction, retail, or tourism, monthly management accounts can help you plan for those fluctuations.
By comparing monthly results over time, you can build a clearer picture of your seasonal trends, allowing you to manage stock, staffing, and marketing efforts more effectively during peak and quieter periods.
5. Plan for tax liabilities
One of the most common challenges for small businesses is setting aside enough money to cover corporation tax, VAT, and other liabilities. Year end tax bills can come as a nasty surprise if you haven't been monitoring profits and setting funds aside throughout the year.
Monthly management accounts help you stay ahead of your tax obligations by giving you an ongoing view of your profitability. With this information, you can work with your accountant to estimate future tax bills and ensure you're putting enough aside to cover them.
How DWilkinson&Company can help
At DWilkinson&Company Chartered Accountants, we specialise in helping business owners run successful, thriving businesses. One key way we support our clients is by offering tailored management account services.
As part of our essential business service offering, we can produce monthly management accounts, giving you the financial clarity you need to make informed decisions year round. Our reports are easy to understand and customised to your specific business goals. Whether you want to monitor profitability, improve cash flow, or track the performance of different areas of your business, we'll provide the insights you need to stay on top.
Because we work closely with small businesses and start-ups, we understand your daily challenges. We aim to take the stress out of financial management so you can focus on running your business.
Start gaining control of your finances today
If you're currently only looking at your accounts once a year, now's the time to take control with regular management accounts. With a better understanding of your numbers, you can avoid nasty surprises, manage growth more effectively, and make confident, data-driven decisions.
To find out more about how DWilkinson&Company can support your business with monthly or quarterly management accounts, get in touch with us today for a free consultation. Let's work together to make your business not just successful but thriving.