Ten Tips for meaningful management accounts
No two businesses are the same, but you would be surprised how many face the same obstacles and could radically improve their control and decision-making by improving their financial systems.
Here are my top 10 tips for good control:
- Data Accuracy - if you don’t take care inputting data, the outputs will be meaningless. Because you can input into Line 50 or Quickbooks, it doesn’t mean the reports mean anything. In many cases they are so mis-leading you’ll be shocked.
- Staff Training - train staff to input data and complete financial tasks correctly. It will save you time and money in the long term and may help you avoid taking a decision based on incomplete or incorrect information.
- Sales and Cost of Sales Analysis - you have to know how you make money, what is profitable, what is less so. In most businesses the sales line is a mix of different products, so find out where the money is being made, and lost.
- Presentation - lots of numbers can be difficult to interpret, graphics are much easier - get the key numbers into graphs - it is as simple as that.
- Benchmarks and Key Performance Indicators (KPI’s) - get the right measures for performance - industry standards or prior year results will give you a good feel to how you are performing. You may want to develop further KPI’s, which are more likely to come from a good financial model of where you expect to be.
- Flash Results - devise simple, quick fire solutions to find out how you’re tracking very early on. Don’t wait for the full reporting, get the 95% picture quickly. If it looks good you can focus on the next period sales.
- Reconciling Control Accounts - we wouldn’t expect the non-financial people to understand this, but unless you have reconciled your bank, debtors, creditors, stock, WIP and other key control accounts you cannot rely on your reports from the system.
- Cut-Off, Date Sensitivity and the Accruals basis - another one to baffle the non-financial among you. If you pay rent a year up-front you need to spread the cost across 12 months. If you sell a product for £50k on 30th June but receive the cost invoice from the supplier for £35k on 1st July, the system will give a false profit: If you run a report to 30th June, it will be overstated by £35k (unfortunately you’ve already paid yourself a big bonus and spent it, based on the June report). Matching sales and costs and overhead to the correct period is essential!
- Understanding and Learning - if you do all the above, you can make well-informed decisions, review outcomes of those decisions with confidence in the data, and really start to understand how your business is performing.
- The Experience to Co-ordinate - you really do need someone who knows what they are doing and who understands how accounting systems work.
Why not get in touch?
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