Monthly management accounts are a handy overview of the financial health of your business, but why is this important? And, what can you do with this information? In this article, we go over everything you need to know about monthly management accounts, and why your business needs them.
So, what are monthly management accounts? Monthly management accounts are, essentially, a snapshot of the financial health of your business, which helps you to make good, data-driven decisions and sustainable plans for the future. They also help you to identify any areas of concern that may need to be addressed.
Read on to learn more about the importance of monthly management accounts.
What are Monthly Management Accounts?
Monthly management accounts are a great way to gain an overview of the financial health of your company. Whilst it might seem like a tedious, unnecessarily frequent activity, monthly management accounts hold huge benefits for you and your company.
The information presented in monthly management accounts helps managers and the decision-makers in a business to make good, data-driven decisions, which pose fewer risks than going ahead without such information.
Management reports also help companies plan for the future based on real information. This sets a company up for realistic, sustainable growth.
What’s more, monthly management accounts also detect any areas of concern that, if left unchecked, could have a larger impact on the business. However, when identified in a monthly management report, actions can be taken to resolve the issue and reduce its impact.
What are Examples of Monthly Management Accounts?
Monthly Management Accounting can cover a wide range of financial information, including:
- Cash flow analysis
- Product costing and valuation
- Inventory turnover analysis
- Constraint analysis
- Financial leverage metrics
- Accounts receivable and accounts payable management
- Trend analysis
What is the Purpose of Monthly Management Accounting?
The purpose of monthly management accounting is to assist the management of a business across its functions (planning, organising, directing, controlling), with accurate, useful financial information that helps these functions to perform efficiently.
Control Over Costs
Management accounting helps you to gain an accurate picture of both income and outgoings, helping you to make more informed decisions about where the company’s money is going, and whether or not it’s worthwhile.
Robust, regular management accounts can be useful for a number of planning scenarios, including seeking investment and funding. Banks and investors will want to see an accurate financial overview of your business before deciding to get involved.
In terms of internal planning, your monthly management accounts can also help with budgeting and forecasting for the upcoming period. What’s more, management reports can also be used as evidence when presenting ideas to decision-makers, and for reference when planning operational activities.
If you’re in a position to have to make important decisions which could have a huge impact on the business, you’ll need an accurate, recent snapshot of your financial landscape before making any decisions.
The financial landscape of the business can often be the deciding factor in decision making, and for good reason – the last thing you want to do is make a decision that will have a negative impact on the business when your finances are already looking sour.
Stronger Year-End Position
A great benefit of monthly management accounts is that you’ll be in a stronger position for year-end accounting as you’ve been keeping on top of your finances throughout the year.
You’ll never end up in a position where you receive a nasty surprise at year-end, wondering where things went wrong, nor will you end up celebrating an unexpectedly good year, whilst simultaneously worrying about extra taxes.
Who are Monthly Management Accounts Prepared For?
Monthly management accounts are typically prepared for business owners, CEOs, CFOs, decision-makers, directors, and other senior management within a business.
There is no set rule on who can and cannot use management reports (except, perhaps, in cases where businesses restrict access to documents for those who don’t reasonably need to access them), but it is typically higher-level decision-makers, and those within the finance department, that will make use of such information.
What Should be Included in a Monthly Management Report?
To make your monthly management report look professional and official, ensure to include a branded cover page, a summary of high value company strategies, mission statement and values, and a table of contents for easy navigation.
Moving on to the guts of the report, you should begin by looking at strategic goals and objectives, including key drivers, your definition of success, and other relevant data analysis questions.
You should also include data for your company’s KPIs. When deciding what information to include here, consider what the readers of the report need to know to make decisions and to plan for the future. In this section, it’s a good idea to present the information, and what it means, as clearly as possible with easy-to-read graphs and charts, and summaries where you feel it is appropriate.
Make sure that the most important information and your company’s most important KPIs are easy to find and easily understood.
Monthly Management Accounting in Southend
ARB Accountants provide monthly/quarterly management accounting to help you review your business’ performance, and help you to understand how your business can run more efficiently.
Our team of chartered accountants in Southend will put together your monthly or quarterly management report based on the individual requirements of your business, and will help you to better understand your financial landscape so that you’re in a good position for making sustainable business decisions. .
Get in touch with us today to learn more about our management accounting service.