Management accounts are not a legal requirement for businesses but should form part of any business strategy.
Business owners should prepare management accounts weekly, monthly, or quarterly which enables owners to plan, keep on track of the business strategy and amend business goals.
They show current financial information for both limited companies and sole traders.
However, there is no set way of preparing the accounts as the content can vary from business to business.
As a rule of thumb, they should include statistics on cash flow, income, turnover, expenditure, and key performance indicators (KPIs).
Management Accounts and Cash Flow
Tracking cash flow and seeing what is coming in and going out from your business should be a priority.
Mismanagement of cash flow can lead to business failure. You should look at your current cash flow and gauge where you will be in six months’ time.
This helps manage debts such as paying suppliers, employees, and other financial arrangements.
To keep on top of cash flow you need to keep on top of your bookkeeping. Hire an accountant if needed.
Track Trading Patterns
Recognising trading patterns can provide new opportunities for business growth.
In addition, they can help create a risk management strategy for future business which minimises losses.
Management Accounts and KPIs
There are endless KPIs to track for business use. Creating a bespoke list for your own business is key to your success.
These should link to your business strategy and form a guide for business reviews. KPIs should be quantifiable measurements that show your performance.
Examples of KPIs are:
Gross and net profit
Customer satisfaction with NPS scores
Customer Lifetime Value
Customer churn rate
Management accounts will highlight any shortfalls. This will allow the business to take steps to address the issue.
Additional funding is an option here and there is a wide range of finance facilities to unlock your business’s potential.
Whether you are looking for a short-term loan to cover a cash flow expenditure such as tax, or a longer-term investment such as acquiring another business there are options for you.
You can use additional finance for most business reasons whether this is expansion, growth, acquisition, or assets.
If cash flow is a challenge for your business, then we can introduce working capital in all forms of funding.
V4B Business Finance
For information on additional finance for your business, contact us for a FREE business consultation:
Call 01978 668939