Accounting may appear to you as nothing short of witchcraft. However, you have to take the initiative & optimise in-house accounting processes. You need updated financial records for dealing with business’ challenges & preparing financial reports like management accounts report.

Your business benefit from reliable accounts receivable and payable processes. It will enable you to successfully stop money leaking out of your Small and Medium Enterprise (SME) through revenue loss, fraud or late payment charges.

 

Why Your Business Needs a Management Accounts Report?

In today’s competitive world, you need to make data-driven decisions to produce effective results. It means you need to update your books regularly. You also need the latest data to prepare management reports for your monthly board meeting.

You have to arrange the things in such a way that you will be able to see the management accounts report at the end of your business’ monthly accounting cycle. It should not be too big, or you will smother your board under the heap of data. Don’t be alarmed. It is not too hard a task if you are using robust online accounting software.

Your board members do not need to see each and every figure concerning your business finances. And, they may not be in a position to appreciate a lengthy analysis. You should aim to produce a short document that offers one or two pages of actionable financial data.

Give them a report on the key drivers of your company’s progress. Prepare it in time before the figures go stale on you. Focus on the needs of the board and keep on refining it till you get it right for every occasion. Compile the data in a format that is reusable where you simply copy & paste it from one to another document like board template.

The report should identify and elaborate on:

  • Key drivers of the performance of your company
  • Goals & objectives that you need to attain
  • Your customers’ need
  • Effective pricing policy

 

Preparing Management Accounts Report

While preparing the management accounts report for your Small and Medium Enterprise (SME), include the name of company, date when it was prepared, and number the pages.

These reports are confidential and are prepared for the eyes of management only. So, emphasise the fact by putting the term “Strictly Confidential” prominently in the header and footer of each page of the report.

Depending on the needs of your board, you may have to include all or a subset of the following facts in your management accounts report.

  • Cover Sheet: State your company name and the date in question.
  • Executive Summary: Give all the key financial and other relevant facts regarding your company’s performance.
    • Company Performance: Summarise key aspects of the company’s performance (highs and lows) over the last month. Populate the report with a list of the company’s actual turnover, gross margin, overhead costs, and operating profit for the last 3 months, broken out by product or service lines giving % growth.
    • Cash at Bank: Include last 3 month’s bank balance. Do not forget to include overdraft facility, if you are using it.
    • Aged Debtors: Summary of how the aged debts so it is easy to spot high % of old debt.
    • Count the Heads: Give number of employees by departments.
  • Capital Expenditure: Amount spent on purchasing any fixed assets over the period.
  • Key Performance Indicator: Summarise your company’s KPI for the last 3 months, including its break-even turnover, the rate of cash burn or generation, sales and overhead per head. Also, include how much cash you have, and the months it can last for.
  • Forecast: Your report should include variance and forecast. It makes it easy to see if you are on the right path or not.
  • Profit & Loss Forecast vs Actual: Give detailed but meaningful info under company’s Profit & Loss headings. It is useful in reading the trends. On the left put actual against a forecast for the last month. Render monthly P&L numbers side-by-side. It gives trends in revenue & cost. Comment on material movements.
  • Budget: Use P&L format to show monthly or quarterly numbers for the full year. It proves to be a valuable reference source for decision-makers on what was decided and how the execution went.
  • Balance Sheet: Prepare your company’s monthly balance sheet to show Fixed Assets (asset class), Net Assets, Current Assets (stock) & Liabilities (Creditors), Debtors, Cash, Taxes, Accruals, Debt, and Shareholder Funds.
  • List of Aged Debtors: Compile a list of customers. List the oldest debt at its top. Provide commentary for the debt.
  • Forecasting Cash Flow: A projection of the flow of money in and out of your company over the next 6 or 12 months.

Don’t forget to send the fully prepared report to the Finance director. You will need his or her signature on it. This is all about how to prepare management accounts for a small company.