Category Archives: Managing Business Finances

What makes good management accounts?

Usually management accounts look very similar to the set of accounts that you get at the end of the tax year, but on a more regular basis – usually monthly – and in more detail.

Most cloud accounting software produces all these reports, so surely that’s enough? In some ways, yes it is, but there are two things to remember:

First: “rubbish in, rubbish out”. Simply printing out a snapshot of the accounts is unreliable. To improve the quality of the information you need to:

1. Make sure you have enough detail to see what’s going on – “Administrative costs” is good enough for the year end accounts, but does it help you see where the costs have built up?
2. Check all the sales and purchase costs have been included (and the accounts are up to date). this sounds simple, but isn’t as common as you’d think.
3. Think about making sure that only costs associated with this month are included – if you deduct a whole year’s insurance costs from one month’s sales your results may be skewed disastrously.
4. This is where stock counts come in, but also prepayments (spreading an invoice over several months) and accruals (estimates of costs not yet invoiced).

This creates accurate and reliable accounts. The second thing to remember is that there are no rules as to what you need to show in management accounts. The real benefits come from shedding light on what’s going on “under the hood” in your business.

Things like:
Financial metrics: debtor days (a comparison of how long customers take before paying), ratios splitting sales between different products or services, etc
Non financial metrics: customer numbers, spend per customer, active orders, etc
Variances: how this month compares to last month, or to forecast
Forward plans: a radar highlighting where problems should be expected, and an idea of liabilities (tax bills) in future.

Good management accounts should give you the information you need to identify the actions to take to steer the business towards the objectives that you want and they help you track the results of those strategies as well as the unintended consequences.

This is not about having reams and reams of paper to look through every month. You need a dashboard that shows the information that you need neatly summarized so that it doesn’t take an expert to find the figure that you want, and clear and unequivocal so that you can make decisions quickly.

If you would like to find out more, or you have a specific issue that you need help with then contact Susie either via the website here or direct on 07801 199671 or susie@poundlane.co.uk

Covid-19 support navigator

At the time of writing the lockdown has been in force for 6 weeks, and in that time there have been a myriad of support packages (and revisions) announced by the government in an attempt to keep businesses in business. It has been a constant struggle to try to stay up to date.

But no longer: the government has added a “support finder” tool to the Covid-19 resources on the gov.uk website. Take a look at www.gov.uk/business-coronavirus-support-finder

The finder works as a series of questions with ‘yes/no’ and tick-box answers. It doesn’t require any identifying details (name, tax UTR, PAYE reference, etc) so you can investigate the support without creating a history. The questions, and the information you will need to know to answer them are:

1. UK nation in which your business is based
2. Number of employees (more or less than 249)
3. Annual turnover (<£85,000, £85,000 to £45 million, £45 million to £500m) 4. Are you an employer with a PAYE scheme?
5. Are you self-employed?
6. Rateable value of your premises (<£51,000, >£51,000 or N/A)
7. Business sector (retail hospitality & leisure, nurseries, other)
8. Eligibility for Small Business Rate Relief or Rural Rate Relief (on 11 March 2020)
9. Are you due to make an Income Tax Self-Assessment Payment-on-Account on 31 July 2020 (unlike the previous questions, this relates to a personal liability not related to your business)

Your responses to the above questions generates a tailored list of support packages for which your business may be eligible.

For each suggested package, there is a brief description of the measure and eligibility, with a link to take you to the relevant page of GOV.UK for further detail.

Start your search here or take a look at our resources and notes about the various options here