The term management accounts refers to standard or tailormade financial details that will be produced on a quarterly or a monthly basis, aimed at helping to monitor a business’s performance. They are not a mandatory requirement that HMRC or government imposes in the way that statutory accounts are and will be prepared at the end of the financial year with a focus on an individual business’s requirement.
Management Accounts will act as a report on financial details that will be used by management and owners of business to give valuable insight into the health of the finances of that business. They do that by attacking KPI (key performance indicators) and they are also used for strategic decision making, on a day to day basis.
Management Accounts are also crucial in financial planning and in growing companies. If you intended to go to the bank for a loan, Management Accounts would be extremely useful as they show an assessment of your financial data and any decision maker would see easily whether or not you had a strong financial position and would be a good candidate for a loan
Management Accounts, where they are used in small businesses, are crucial for monitoring and running the organisation and for highlighting key indicators relating to performance. They will also chart whether goals are being achieved within the timeframes that have been set.
To summarise, Management Accounts can be an extremely useful tool that can be used to ensure that a small business is run to its fullest potential. It will also highlight successes and failures so that the right financial decisions can be made to drive the business forward.
When you are preparing a management reporting pack you need to make sure that all relevant information that will be needed by the key decision makers in the company or the management are there, so that they can make educated an informed decisions. Some larger organisations may have very large sets of management account reports but most management reporting packs will consist of the following: