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What Are Management Accounts and Does My Business Need Them?

If you run a limited company, you’ll be aware that you need to produce annual accounts, but do you know about management accounts?

Annual accounts give you a comprehensive report of the financial activities of your company over the last year. They are a valuable tool in assessing where you’re at as a business, and how you might look to grow going forward.

But what if you want to see this kind of report more regularly than once a year? That’s where management accounts come in. Keep reading to find out more about what they are and how your business could benefit from them.

How Do Management Accounts Differ From Annual Accounts?

Aside from the fact that a business will produce management accounts more frequently than annual accounts (usually monthly or quarterly), the principles are similar. Their purpose is to provide business owners with a way of assessing where they stand as a business and help them to make decisions based on these assessments.

Management accounts are usually less formal, and more tailored to the specific needs of the business but will usually feature a Balance Sheet and a Profit and Loss report. 

One thing to note about management accounts – these are not a statutory obligation unlike annual accounts, so there’s a little more freedom and customisation because you don’t need to tick any legal boxes in producing them.

What Are the Benefits of Management Accounts?

As we mentioned, management accounts will help you as a business owner to make decisions. But lets take a look at what that exactly means. What decisions can management accounts help you make?

Target Your Sales

A set of management accounts can help you to discover who your key customers are based on your turnover, and which of these customers are bringing the most profit. This can then help you make decisions regarding your sales–how do you market in such a way that will bring in and retain these lucrative customers?

Curate Your Expenses

Looking at your overheads as a business is important all year round. Monthly or quarterly analysis of your costs could save you substantially more money than doing things annually. 

Improve Cashflow

One of the aspects of running a business than can really hinder growth is cashflow. Management accounts will allow you to look at what money comes in, and when. From there you can establish what changes you might need to make in order to have a more regular flow of cash in and out of the business.

Streamline Year-End Activities

Producing regular management accounts can make producing your annual accounts a much smoother process. Discrepancies and queries are resolved throughout the year so that when it comes to submitting the year-end accounts, there shouldn’t be any surprises.

Do I Need Management Accounts?

The fact is, not every business really needs management accounts. Some small businesses with simple, unchanging activities would be better placing their time and efforts into other business activities.

But if you’ve read this article and think that you’d benefit from management accounts, we’re here for you!

At Countplus, we will help create a tailored service in which you’ll receive management accounts at the intervals best for your business, and containing all the information you need to grow. Get in touch today, or read more about management accounts here.

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