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Management accounts are a financial report that help you to assess your businesses financial position and draw your own conclusions. They are usually produced on a monthly or quarterly basis, so that you can compare them to previous accounts and track your progress against forecast figures. Management accounts will be completely unique to your business, and their structure will depend on what is most important to your business. The key elements of management accounts include KPIs, cash flow, profit and loss and balance sheets, which we will explain in further detail.

Key performance indicators (KPIs)

Each business will set its own KPIs, which are specific goals you are aiming to achieve within a specific period of time. They could be financial goals that you aim to achieve every month or quarter. Such as cash flow, growth in revenue, profit margin, or current accounts receivable. They could also be based on performance, for example how many sales leads you are aiming to achieve.

Cash flow

It is essential to have a full understanding of your cash flow so that you can make important budgeting and investment decisions. A cash flow statement will summarise cash entering and leaving your business, but management accounts go one step further by analysing this data and identifying trends, so that you can utilise this more effectively. You can look at details such as areas of your business that have high operating costs and the amount of time clients take to make payments. This information helps you to put together a more accurate cash flow forecast.

Profit and loss

A profit and loss account summarises your business revenues, costs, and expenses for a specified period of time. It is important to produce multiple profit and loss accounts in consecutive accountancy periods, so that you can compare them and identify trends. Profit and loss statements are particularly important to potential investors and analysts for your business. They use this valuable information to assess the profitability of your company and combine it with other financial statements to develop a clear picture of your business current financial position. By law, all limited companies must produce a profit and loss account for each financial year, so that your accounts can be published on Companies House. To make projections for future revenue is its necessary to lookback on past sales and expected income using a profit and loss account.

Balance sheet

A balance sheet highlights your business assets, liabilities and shareholder’s equity. It focuses simply on the numbers, so that you can assess the financial health of your business and you can see how much your business depends on borrowed funds. Your management accounts can allow you to look at your liabilities over time and how well your business manages debt.

Management accounts are highly beneficial for your business to help you analyse performance and plan effectively for the future. They can provide you with complex figures that you may find difficult to understand, which is where our experts come in. At Bells Accountants, we offer management accounts as an extra service to you so you can get to grip with business finances – contact us for a quote. Call 020 8468 1087 or email so that we can discuss your requirements.