As Profit Consultants and Part Time Finance Directors we have seen many examples of poor management accounts and reporting. We are often appointed because of poor trading. Funny that!

Content of management accounts

– Profit and loss should be compared against the budget and the previous year, using year to date figures rather than simply adding monthly figures together. It should also include a rolling 12 month reforecast.

– A balance sheet is essential, if not there is a good chance that your profit and loss figures are inaccurate.

– Key balance sheet items, including trade debtors and trade creditors, should be part of the reporting.

– If your business has divisions or subsidiaries, separate management accounts should be prepared for each, together with consolidated accounts and a summary reconciling the consolidated accounts to the separate accounts.

– Sales reports and if possible, margin reports, should be included.

All these reports should have one person ultimately to own and report on them.

Speed of producing management accounts

 
Your management accounts should be produced as soon as possible after month end.

If they are not, it usually indicates issues. For example:

Sales invoicing – This should be complete by the first day of following month. Invoices should be included in the month already and you should know what has been despatched or what services you can bill or accrue for.

Cost of sales – If you do not have an accurate or good estimate of cost of sales then you need to get the systems working.

Staff costs – You would have payroll already processed and this should be integrated automatically into the accounts.

Rent and rates – You should know rent and rates from previous bills.

Overheads – Most overheads do not change significantly from month to month. If there is one-off expenditure, such as recruitment cost, then this should be clearly identifiable.

With all of these in place, you should be able to prepare a flash profit and loss account very early in the month. The figures should not change materially, giving you time to review and finalise the numbers.

Operational KPIS

Every company should not forget operations and their KPIS. Each company will have different ones, but we would suggest you identify 6-8 key operational measures and produce this monthly in a graph against targets.

Our data is too complex. I hear it!

We have too many data sources. The good news is that there are ways to overcome these challenges, which we will explain in our next blog.

If you need help putting these into place let us know on 01628 623444 or info@s4b.uk.com. Your helpful Profit Consultants.