Tag Archives: Business

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

Train Life

I set myself a couple of challenges with my New Years Resolutions this year: firstly, to reduce my carbon footprint and secondly to use my time more effectively.

So the first change to make on the way to achieving these goals was to switch the car for the train where possible. Admittedly I am lucky to live within a stone’s throw of the Tarka Line between North Devon and Exeter, but even so I have been surprised by the outcome.

First of all the train is cheaper than driving in to Exeter, especially when you add the cost of parking. And it achieved my primary objective of reducing my car’s carbon emissions.

In addition to this I can sit on the train working, reading, or writing (blog posts for example!). I try to spend my driving time listening to audiobooks and while this is mostly educational it always feels like using up dead time rather than being productive time.

So far so good, these are the changes I expected to see. But I have noticed other changes that I didn’t expect:

I have to be more organised – I think I’m pretty organised with my client work, but planning of my personal time is always far from being a priority. Now I am making more time for getting to and from events, so I am more relaxed and more likely to be on time!

I’m walking more, to and from the station, which I hadn’t realised would happen. And it’s through the centre of Exeter past all the lovely shops; because I’m walking I can I actually appreciate it, rather than just grabbing essentials at service stations.

Finally while I like to think that I am comfortable with new situations, I’ve been surprised at how much I’ve had to learn (read this as how many times I’ve had to ask people for more information!) and this has highlighted how stuck in my ways I’ve got.

I’ve learnt loads about the Tarka Line, needing time request that I stops at the right place, needing to find out which platform to be on (sometimes there’s just one, for both directions!), how long it takes to walk across Exeter, and how to solve the various problems that have already sprung up.

Plus I’ve learnt more tedious things like how my laptop bag isn’t as waterproof as I had thought and how I need to reconsider my handbag choices so that I can carry my insulated coffee cup around after its been emptied!

The bottom line is that I am loving the train travel, even without considering the money or carbon saved. So from next week I’ll be using the train for travel north into Barnstaple and I’m ready to consider the next change to make.