You already get a set of accounts completed once a year, so why does my accountant keep telling me to prepare management accounts too?
“What’s the bloody point of management accounts?”
It’s interesting, as that’s a question that comes up quite often. Not always put as bluntly as the above, but it’s usually what people are thinking.
Well, in our opinion, management accounts are far more important than one set of annual accounts. Regular management accounts provide far more insight as they are prepared DURING the financial year (well, maybe not the last set).
This means that you, as the business owner, can actively see what your business is doing during the year, giving you the opportunity to implement change, push forward with strategies, budget for future growth/expansion, consider future funding requirement. To be honest, there’s a massive list.
One of the reasons that we insist on all of our clients using Xero or FreeAgent is that, so long as they have a solid bookkeeper, they will be able to run at least a set of basic management accounts frequently. Some of our clients do it weekly, especially during busy periods.
We like to think that we build out on the basic reports that are thrown out of your accounting package. We go one step further, making the same accounting adjustments that you would at the end of the year, during the year. The reporting we suggest also goes more in-depth and provides more insight.
In reality, good fundamental bookkeeping plus strong management accounts provides a business owner with a powerful set of information and arms them to make decisions.
Also, as accounts are reviewed and prepared more frequently your annual accounts fee will be lower. Every cloud!
So, what’s the bloody point of management accounts? More than just providing you with your annual tax bill, which to be honest is all that you use your annual accounts for!