It’s hard to predict the future in business, but our management accounting service goes a long way towards helping. Take the first step to controlling your finances.
Business owners often see management accounts as confirmation of what they know about their business already. We work with business owners very closely, meticulously planning and forecasting their results. However, it is still difficult to predict what will happen to a business in the future, meaning the need for accurate management information is integral.
Business owners often assume that because cash has remained the same over the year, that profitability naturally follows in accordance. However, assuming the financial position of your business is dangerous because there’s no proof to back your assumptions.
Management accounts are the first step to truly controlling your finances and a vital tool to remove risk and safeguard the interests of your business and its stakeholders.
Why is this? Without accurate, good data, it’s impossible to produce management accounts. Having a requirement for management accounting keeps everyone within the finance team in check – it keeps the credit controller chasing debts, it ensures the purchase ledger clerk continues to manage supplier accounts and so on. By simply having detailed and accurate management accounts, you’ll be able to spot areas where there is room for improvement not just within your business, but also in your finance department.
Management accounts for complete financial insight for your business
We don’t create management accounts just for you to see a profit and loss statement every month. We give important consideration to various factors which can dramatically transform the fortunes of any business including:
- Year on year movement to each month
- Total sales and how they’re increasing or decreasing
- The change in wages and how they’re increasing
- Changes to gross profit
- Services that generate income and its profitability
- The cost of fee earners against their sales
- Client visits within a year
- The number of client visits per fee earner
- Scenario analysis
- Putting figures into context
The benefits of management accounting
Accurate data delivered quickly.
We often hear stories from clients that their previous accountant took months to provide management accounts. Not only is this sloppy and makes the figures and information useless, if it’s received several months later, it also puts a business at risk. Providing figures quickly means business owners get a proper overview of the performance of their business and are in a position to spot irregularities with figures and resolve them accordingly.
Spot opportunities to reduce costs.
The desire to reduce the operational costs of a business will always be high on the agenda for business owners. However, without accurate data, there’s no way of knowing whether the cost of the services your business provides are good or poor – they might be excellent.
Furthermore, if a business has a need to spend less, if you’re uninformed, how can you be sure what to spend less money on? Rather than the desire to reduce costs being arbitrary, having management accounts in place can help identify sales strategies to improve profits and ultimately help business owners make informed decisions.
Drive operational improvements for better financial results.
It’s not uncommon for us to work with a business owner who has been under-forecasting the profits of their business for years, in the belief that they have a good gross profit margin, not realising how profitable their business could be. Management accounts can be used to improve efficiency and profitability, but equally they should be used to ensure that a business hits its net profit and gross profit figures.
For example, we helped a group of hair salons improve stock management. Prior to making a series of improvements to their accounting processes, there was little control over stock and no tool in place to accurately measure the impact of their stock used. Using ratio analysis – some mathematical comparisons – enabled us to work out what margins they were operating at to a very detailed level.
This gave us our starting position which essentially enabled us to work out where they were going wrong. In our capacity as finance director, we helped them to recruit someone to manage their stock, integrate appropriate stock management software, referring back to our bookkeeping team about the processes we had implemented for better stock management. We brought their in-salon product spend down from 24% to 16% of sales saving just short of £100,000 a year.
Small percentage differences can have a huge impact.
Controlling your finances with detailed management accounts to make business improvements can have a huge impact on a company’s profitability. A company could have the same turnover as the previous year, however making small percentage changes to a business’ processes and procedures can increase a company’s bottom line significantly.
Get informative management information you can act on today.
To take the step to truly controlling your finances speak with one of our expert accountants today by calling 0116 255 2422. Alternatively get in touch by completing the form below which will go directly to one of our management accountants..