As a business owner or manager, you know that financial information is critical to making sound decisions. Management accounts provide you with the financial data you need to make informed decisions that can drive your business forward.

-

In this blog, we cover the key points in producing good management accounts:

• Management accounts must be accurate. Take your time to define and refine the process. It's better to present no information than inaccurate information. 
• Management accounts must be timely. Not every company has the resources to publish full accounts or an elaborate “pack” each month, so decide on an achievable schedule whether it be monthly or quarterly and stick to it. Monthly accounts should be published within 5 or so days of month-end close so that the information is reviewed while relevant. If you don’t have the resources to publish, monthly consider doing a simple monthly KPI dashboard with full accounts produced quarterly.
• Use metrics and comparables and make. Every management account pack should include, at a minimum, an income statement, a balance sheet and a cash flow statement. These should be compared to relevant comparables such as last year or a budget. The accounts will report the number but the comparables help explain if it’s a “good” number. In addition to the accounts, there are a wealth of operational KPIs that can be used to track performance. Try and present these in a way that is easy to visually digest; use graphs, infographics and traffic-light colours to highlight positive and negative variances.
• Commentary is important and must be insightful – try and answer the question “so what”. For example, don’t say “Gross margin is down 2%” construct a sentence based on. Fact- Impact Cause Action and say something like “Gross Margin is down v budget by 2% (€100k cash impact) due to increases in prices by suppliers. Our customer pricing strategy must be reviewed urgently to maintain margin”.
• Accounts should be both backward and forward-looking. Some management accounts look only at the last set of results and that is crucial but looking forward can help make the pack even more effective. Try and forecast in numbers the implication of current trends – this can help stop small problems becoming big ones.
• Layout should be consistent from month to month. Management should know what to expect from the pack and be easily able to navigate it. You won’t get the layout right day one so take your time to perfect it, consult widely and then settle on a format and stick to it.
• Finally, and most importantly there has to be actions and follow-up as a result of the management accounts. The accounts should be reviewed at a meeting by the management each month resulting in a list of actions. The following month’s pack should have the actions listed along with the relevant follow-ups.

-

At Cooney Carey, we work with businesses of all sizes to help them develop and implement effective management accounts. By using management accounts businesses can improve decision-making and drive growth and success. Contact us today to lean more about how we can help your business achieve your goals.

-

Reach out to our team of experts for more information at info@cooneycarey.ie.