The eyes of many directors can glaze over at the thought of looking at a set of accounts. I can sympathise – going through lots of badly laid out and sometimes unimportant information is not appealing! As a numbers person I can handle it, but for non accountants? …..well yes, I can see it IS boring!!
Accountants are sometimes disparagingly referred to as bean counters who are regarded as a necessity, but adding little value. Producing figures that make the reader’s eyes glaze over only supports this view!
At the risk of stating the obvious, management accounts should help you manage your business. Accounts software packages usually come with standard layouts of accounts and while these can be tailored, all too often this doesn’t happen.
To truly work for you, management accounts need to be relevant, readable & reliable
Here are some thoughts:
Management accounts should convey the profitability of the main income streams and the costs in a way that mirrors the organisational structure. As key drivers in your business change, so should the structure of your accounts.
There should be lead sheets with salient headline information and supplementary sheets to deal with the detail.
Non financial information that is relevant to the business should be included (eg: units produced or hours worked). Other key data (perhaps average selling price or margin per unit) should also be included.
The accounts should also contain balance sheet information with due attention to stock and debtors as it is important to pay attention to these areas to maximise cash in the business.
Management accounts can be used to benchmark actual performance against your business plan. It is better to flag issues sooner rather than later so that any corrective action can be taken early. The accounts should be reviewed to highlight issues in the business that need attention. If they don’t make sense it either is a signal that the business is not running in line with expectations (or that there is something wrong with the accounting).
Good management accounts should help give you a sound insight into the business and make for better decision making – making beans part of your recipe for success!