Valuable and insightful management accounting services done right

Of course we can. There is little point providing you vital information on your business if you don’t understand what it means.

Management accounts provide you with an insight into how your business is performing. They are developed to assist you strategically and we will work with you to include the information you will find relevant and informative,

Management accounts feed into decision making and planning and are also helpful if you are looking for investment; they show you have your finger on the pulse. You can see where there are issues in your business, opportunities for growth and development and shine a light on performance.

You should include the information you need and there is no set format for management accounts. However, it is likely you will want to see:

• Key Performance Indicators as they are a vital tool of measurement and enable you to see what is and isn’t working.
• A Profit and Loss account where you can look deeper than standard reporting, breaking it down by product or department, and look at your performance against targets.
• A cash flow statement gives you a top level view but in your management accounts, you look in more detail to understand things like departmental costs or cyclical income.
• A balance sheet within your management accounts can provide more information than the top level balancing of accounts to look at debt management or time taken to generate a return on investment.

They are a critical part of the support we provide to our clients and are developed to be a critical part of your business information.

Every business owner knows how important their cash flow statement is, enabling them to have an overview of the business to plan budgeting, funding and investment decisions.

Management accounts take the data from your cash flow statement and studies it in more detail. You can use it to identify trends such as cyclical income or periods of high expenditure and gain a clearer understanding of your ability to cover your operational expenses and short term liabilities.

It assists in planning, such as to support making decisions about when to incur additional expenses. Clarity about payment timing, departmental costs and seasonal variances enable you to allocate your financial resources effectively across your business.

You should identify the metrics which are important to you as that will ensure your management accounts help you to make those important business decisions.

There are some which are pretty generally adopted and these include:

Gross profit margin
This compares your income against your spend to assess how effectively your business is running. It can indicate a requirement to cut costs or increase pricing or focus on a more profitable area of your business.

Revenue growth rate
This forms a comparison over previous periods to ascertain whether your business is growing and, if so, by what percentage.

Return on investment
This is an important metric which shows the effectiveness of your investment into the business. It can help to identify those to continue with and those to stop.

Customer acquisition cost
Understanding this metric is vital. There is little point spending large sums on, for example, advertising, if the customers you attract generate little revenue. This helps in planning and decision making.

Operating expense ratio
This metric helps you to understand the proportion of your revenue which is being used on operating expenses to generate the revenue. If it is high, then your profit will be lower.

Average order value
This metric looks at how much each of your customers spend and can be broken down further to look at the product profile. This can feed into your product portfolio and pricing decisions.

Customer churn rate
Here you are gaining insight into customer action after purchase and assist in retention planning.

We recommend discussing your business with your accountant which will help you to identify the metrics which will assist you to make the right business decisions.

The information you require will be dependent upon the information you are looking to understand. Certainly your key reports will prove helpful:

• Profit and loss account
• Balance sheet
• Cash flow statement

But if you want to understand customer churn rate for example, then you will need to access your Customer Relationship Management (CRM) system, other customer records and sales data.

Your average order value will again come from your sales data.

The key to understanding the information you need to provide is to identify the information you would like your Management Accounts to provide you with. But be wary of trying to be too detailed as you can end up requiring something that it so time consuming to create that you can’t complete it.