• Swindon & Wiltshire Experts
• Wednesday April 10 2024
• Author Name: Michael Blaken

What are the benefits of management accounts? – Optimum Professional Services

Most people have heard of management accounts, but not all businesses produce them. perhaps they should, says Michael Blaken of Optimum Professional Services.

Do you create management accounts for your business? If so, do you make full use of them? Are you aware of the benefits that management accounts can bring to a business? Are you unclear about what management accounts are?

Most people have heard of management accounts, but not all businesses produce them. Management accounts are financial reports produced for business owners and directors, usually on a monthly or quarterly basis, and will generally include a profit and loss (P&L) account and a balance sheet.

They are very like end-of-year accounts but less formal, more tailored and the major benefit is their frequency.

Management accounts offer real-time information and that information is essential for owners/directors wanting to make sure their business is on track.

Sitting down and talking through management accounts provides an opportunity to look at how the business is performing and also to make decisions on changes needed to rectify any issues.

Here’s an example: if margins are being eroded, management accounts will make this clear immediately.

Management accounts provide an opportunity to compare performance

If, by contrast, this is only spotted when end-of-year accounts are produced, think how much profit has been lost and how much could have been clawed back if changes had been made the minute the problem arose.

Management accounts also provide a great opportunity to compare performance on a year-on-year, quarter-by-quarter, or even month-by-month basis. Delving into why changes have taken place – why profits are up, or down – will help inform what should happen next.

Management accounts may also reveal patterns or seasonal variations in buyer or supplier behaviour, which may not be obvious by looking only at end-of-year accounts.

All business could benefit from producing management accounts, but they are particularly useful for fast-growing business.

Michael Blaken is accounts director at Optimum Professional Services. https://www.optps.co.uk