Post sponsored by Purple Lime
As a limited company, you have a legal obligation to submit a set of accounts to Companies House every year. And in sitting down to put them together, many business owners take the opportunity to review the performance of their business over the past year, spot patterns and reflect on what could be done differently. All in all, a very valuable process! But given that it is such a valuable exercise, isn’t it something you should be doing more often? We definitely think so, which is why we are so ardent about monthly management accounts.
What Are Monthly Management Accounts?
In simple terms, monthly management accounts give you a snapshot of the financial health of your business at that point in time. They give you a good overview of where you are, what areas you might be struggling in, and where improvements can be made. They are considered one of the more valuable reports if you are looking to grow your business, because they allow you to plan based on real numbers, equipped with facts if you need to change course.
These accounts are generally prepared as soon as possible after the end of each month, so that you are working with up-to-date information. But every set of management accounts will look slightly different and will be decided after conversations between the management team, finance team and your accountant. However, all management accounts should include at least the headline figures you will need to make sound financial decisions for your business. So at the very least, they will include:
- Balance sheet
- Cashflow statement
- Income and expenditure statement
What Information Will They Give You?
We understand the strain business owners are under every day, especially at the moment. So any extra administrative burdens they are going to take on have to really prove their value if they are going to become a regular habit – including monthly management accounts. In the first instance, monthly management accounts will give you more control over what is happening within your business. For example, you will gain more control over your costs because you can clearly see where the money is being spent, and whether that spending is worthwhile. This means you can make more informed decisions about the money you do spend. Monthly management accounts also mean you are regularly seeing a cashflow statement, so you can see the reality of what is coming in and going out of your business. This means if you see a problem on the horizon, you can take steps to bring in more cash in a timely manner. Management accounts are all about putting you in control of your business and giving you the information you need to make the best decisions for it.
Monthly management accounts are also an essential tool for business growth, especially if you are looking for external finance. Having a record of robust management accounts for each month gives banks and investors some much-needed reassurance that you have a firm grasp of your business, and that you are actively monitoring performance.
For example, using these accounts, you can compare budgets and forecasts to assess whether your plans are on track, too ambitious or not ambitious enough. Taking this one step further, you can use that information to empower your team, and get them engaged in your plans at every level. The details of last months accounts will be fresh in people’s minds, so if things are going well, you can make sure you do more of the same in the next month. If things haven’t gone to plan, it’s easy to figure out what happened and take action to remedy it.
Finally, you end up in a much stronger position when it is time to put together your annual accounts, because you have been tracking those numbers throughout the year. So you won’t be in the position of looking at the figures and trying to work out what went wrong. You won’t find yourself celebrating an unexpectedly good year while simultaneously worrying about how you are going to pay the resulting corporation tax bill.
In short, monthly management accounts put you in the driving seat of your business. With the information within the reports, you can make the big decisions about your business with all the information you could possibly want. See the impact of your decisions in the short-term and the long-term and use it to take strategic action and grow your business. At Purple Lime, we can support you in creating management accounts on a monthly basis and present them in a way that is easy to understand for anyone. If you would like to know more, please get in touch to book your free consultation by emailing email@example.com, or calling us on 01249 691360.