You may have a requirement for management accounts for a lender or perhaps you have read that management accounts are important for your business and are wondering how these differ from your year end accounts. Here are some reasons why every business should have an ongoing reporting system which includes finding an accountant to produce regular management accounts:
Up to date financial information – say you were overspending in a certain area up to date financial information means you can nip that spend in the bud rather than waiting for your year end accounts to identify it.
Enhanced decision making – take the guess work out of your decisions. Suppose you are considering taking on a new employee, looking at up to date accounts will tell you how much you are making and whether you can afford an additional employee and how to structure a bonus scheme which works for them and your business.
Legal requirements – if you have investors or a loan the terms of your agreement may state you need to provide monthly or quarterly accounts so make sure you are aware of your requirements.
Potential lending and investors – if you are trying to grow your business, your lenders will almost certainly ask for up to date financial information so they can make an assessment of how your business is performing. They may also ask for forecast to understand how the money invested or loaned will be used. Finding an accountant to engage with on an ongoing basis will make the preparation of this information.
Tracking Your Success – management accounts are your tool to tracking your actual performance against your forecasted performance. Management accounts give you an update as to how you are performing month by month, giving you the time you need to make changes and the greatest opportunity to meet your forecasts.
Tax Planning – if you have up to date financials your management accountant can work with your year end accountant to make the most effective tax planning decisions.
Planning for change – up to date results and analysis allows a business to decide what works and what doesn’t work. Management accounts keeps the Director or Business owner informed so they can make strategic decisions.