What are management accounts and why might you need them in your business? 
It's easy when you're busy running a business to lose sight of what you're trying to achieve. There are deadlines to meet, new ideas to explore and plot out, team members to manage, marketing to do etc etc. The list is endless for anyone running a growing business. 
It's why we sometimes see people lose sight of their numbers, or focus on one thing and miss the bigger picture. For example, a business owner wants to grow their business with the end goal being to exit via sale. They spend their time and effort making new sales, generating new business, adding new team members, getting a great office set up going. All sounds good, but they lose sight of profit. 
Instead of reviewing numbers regularly and spotting that perhaps all that new business isn't bringing the return hoped for the focus is all on turnover. 
Imagine the disappointment at the end of the year when they realise that all that hard work hasn't translated into a healthy profit. That there isn't enough profit to cover their drawings and now they have an outstanding directors loan. 
It's a very common tale and a path that a lot of business owners fall into. Having a good grasp of the management accounts, regularly reviewing them, means you keep a eye on the things you need to and don't feel disappointed after a year of hard work. 
What are management accounts? 
Management accounts is more than just bookkeeping. Once the bookkeeping is done e.g. all your invoices are posted and your bank is reconciled your bookkeepers job is complete. An accountant would then make a number of adjustments to properly reflect how the business operates e.g. they might spread out payments you've made that cover the whole year for instance to get a more realistic view of profit. They would make sure the balance sheet liabilities are correct and that the P&L shows the right profit margin.  
Making these adjustments means you then have a more robust and realistic picture of how the business is actually performing month on month. This gives you accurate and real time information on which you make decisions. Perhaps you want to hire a new team member, or invest in some new products. Whatever it is you can't do it without a good grasp of the accurate numbers.  
What if I don't understand the accounts? 
We understand that sometimes this worries a business owner, and they don't know what to look for when they review their numbers. Most business owners tells us that whilst they might look at the P&L they feel the balance sheet is a mystery. Yet these numbers have real power and help you make great decisions to maximise profit and nip any potential issues in the bud.  
If you don't understand them then make sure you partner with an accountant who does and can explain those numbers to you in a easy to understand way.  
Get in touch 
If you want to chat about how we can help you gain confidence and better understanding around your numbers drop us a call back request and one of the team will ring you to find out how we can help. 
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