Can having a more detailed understanding of your finances make your business more profitable?
At Pound Lane we specialise in management accounts. This is a business function that is common in large companies but is poorly understood, and rarely found, in small businesses.
So why is it that large companies rely on management accountants? Let’s look at the people who typically get involved in the finances in a small business:
Administrator/ Book keeper/ office manager – handling the day to day finances, and often extending to most of the paperwork in SMEs. They keep the records tidy and up to date, and make sure suppliers are paid and customers are paying.
(External) Accountant – you only need accounts at the end of the year, right? The accountant draws up the long (and usually pretty complex?) year end accounts, works out the tax bill and files everything with the appropriate authorities.
This covers it all, surely? But when we look at it like this, it’s all looking backwards; making sure that what’s happened in the past is properly recorded. What about the future? If you want to invest in a new production line, you want to know that it will generate enough savings/ extra profit to pay for itself, and so on.
That’s where a management accountant comes in – forecasting the finances (and that really means the bank balance) are impacted by changes in the business.
This needs more regular reporting (monthly or at least quarterly) so that any forward projection starts with the most accurate information and to keep track of the actual performance versus the original expectation.
Trading in 2020 is a perfect example: by March it was clear that there was no point using a forecast that started with 2019 as a base! During the year the picture keeps changing (with unexpected highs and lows) so that forecasts changed regularly, but with business being drastically effected by Covid-19 it is now more than ever that forecasts are essential.
Change has become an everyday occurrence and that’s when you need good information to make sure you make the right decisions.
You can read more about what to expect in management accounts here. They 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.
How can management accounts help my business?
There’s no “one size fits all” solution: working with us always starts with a business review so that both sides understand what the challenges are and what services are required. (The business review is available without leading to any future commitment, if you’d like to know more then contact us here)
Our services make sure that you have the information you need to make good decisions, when you need to.
This could involve:
– Trouble shooting; highlighting weaknesses in your systems or financial performance
– Understanding the implications of business growth and helping you to get the appropriate funding
– Investigating and planning investment in the business; marketing, machinery or new staff recruitment, etc
– Updating or developing spreadsheets to improve record keeping and business processes
– Setting up and managing accounting software
– Interim cover for your team in between recruitment or maternity leave
Having a management accountant on board with your business will help you make more profit, have more cash in the bank and feel more confident about your business decisions.
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 email@example.com