Monthly Management Accounts and Why Every Business Needs Them

As a limited company, you’re required to submit a set of accounts to Companies House every year. each time you put them together, you take the valuable opportunity to review them and reflect on the year gone past.

But given it’s such a valuable exercise, isn’t it something you should be doing more often?

Monthly management accounts are the answer to this much-needed visibility.

What are monthly management accounts?

Monthly management accounts are a snapshot of the financial health of your business.

They’re a good practice to get into if you want to grow sustainably because you can plan based on real numbers and are equipped with the facts if you need to change course.

They’re also a good practice to get into if you are struggling or want to address the underlying problems you sense are there but don’t know for certain. When you look at the numbers more often, you can take action more quickly.

They’re prepared as soon as possible after the end of each month. Working out what your management accounts need to include will involve a conversation between your management team, your finance team and your accountant. However, in essence they should feature the headline figures you need to make sound financial decisions and will include at the least:

• The balance sheet
• The cashflow statement
• The income and expenditure statement.

What information can monthly management accounts give you?

Most small businesses are working flat out so any additional administrative burdens have got to prove their value if they’re going to become a habit. So, what will you gain when you prepare management accounts each month?

In the first instance you’ll gain more control over what’s happening in your business.

For example, you gain control over your costs because you can clearly see where money is being spent and whether it’s worthwhile. It means you can make more informed decisions about the money you spend.

Seeing your cashflow statement regularly means you can see the reality of when cash comes in and goes out. It helps you plan your expenditure more effectively and enables you to take steps to bring cash in more quickly. What is Cashflow and How You Can Improve It has more on this.

You can also plan for growth

For example, if you’re seeking finance to grow, robust management accounts for each month give banks and investors much-needed reassurance you have a firm grasp of your business.

You can compare budgets and forecasts, so you can assess whether your plans are on track, were too ambitious or not ambitious enough. Taking this one step further, you can use the figures to empower your team and get them on board with your plans. The details of the past month will be fresh in people’s minds so if things have gone well, you can make sure you’re doing more of the same. If things have gone less well, it’s easy to find out what happened and take action on the answers.

Finally, you’re also in a stronger position for year end because you’ve tracked the numbers throughout the year. That means you won’t find yourself in a position of looking at the figures and wondering what went wrong. Equally, you won’t be celebrating an unexpectedly good year while simultaneously worrying about how you’re going to pay the resulting corporation tax bill.

Monthly management accounts put you in the driving seat of your business

The position of your business is found in its financial information, which is why it is so important to have visibility of the numbers. When you prepare monthly management accounts you get the visibility you need when you need it.