Tag Archives: control

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

Finance for Food & Drink Business Workshop 2015

Growth is a challenge for small businessesIt’s been a while since my last blog, in September last year I started a full time contract working as interim FD for a food business which was growing rapidly and faced a lot of challenges managing cashflow and ensuring all its new sales opportunities were profitable.

In July this year I handed over the FD reins and now I am back; focussing on Pound Lane with even more tools to help other growing businesses manage similar challenges.

Something that I overlooked in September was to report back on the success of the Food & Drink Business Finance Workshop that I hosted.

Review of Food & Drink Business Finance Workshop 2015

On the day we had representatives from 6 different businesses at the workshop and a useful forum developed where we discussed some of the challenges faced by small food businesses and shared ideas and tips for solving them.

Topics covered included:
Business plans – the impact of setting out what you would like your business future to look like and then committing your plans to paper so you can review progress against that target at some point in the future.

We heard from Jocelyn and Ferenc Droppa of Droppa and Droppa who were kind enough to tell the group about their original idea and how their business plan has evolved over the course of their business’ life.

“Not losing sight of why I got into business in the first place”

– Chris Smith on what he found useful at the workshop

Finance for Food & Drink Businesses Workshop
Ideas for recording and using accounting information
– the importance of organising your accounts to record figures that are useful to your business, eg splitting sales between several product types, not just between sales with VAT at 20% and sales with VAT at 0%.

The difference between profit and cashflow – every business needs to make a profit, but even the most profitable businesses can have cash crises. When it comes down to it cash makes the world go around so it is vital to understand what effects the cash flow in your business. I will come back to this in a series of blogs this autumn, because it comes up more and more in my work.

Mary Quicke Finance for Food & Drink Businesses Workshop 2015Mary Quicke of Quickes Traditional Cheeses also gave a presentation in which she shared some of her experiences from growing her business into an international brand without “selling out” the quality and traditional style of her cheeses.

One of most interesting points of her presentation was the fact that Quickes’ sales and marketing strategy is not focussed purely on profit, but on spreading business between different outlets as well, to reduce the dependence on any one customer – another way of helping to secure cashflow and protect the high quality/ high price niche that Quickes’ cheeses have.

We rounded of the morning with a buffet lunch, and continued conversation there. Everyone who took part enjoyed the workshop and took away useful ideas for their businesses.

I will be holding more workshops in 2017 and so if you would like to be included on the mailing list please get in touch.