What Are Monthly Management Accounts? An Expert Guide
Effective financial management is crucial for any business, regardless of its size or the industry it operates in.
An essential aspect of financial management is the preparation of monthly management accounts. These reports help you easily see and compare key financial information about your business and its financial health.
Read on to find out more about what monthly management accounts are, why they’re important, and how to do monthly management accounts effectively to help your business stay on top of your financial health.
What are monthly management accounts?
Monthly management accounts are internal financial reports prepared by businesses to provide an up-to-date snapshot of their financial situation.
These reports are customised to suit the specific needs of an organisation, displaying necessary and key information in a simple way. Unlike statutory accounts, which are legally required and follow a standard format, management accounts are primarily for internal use and can be designed or laid out to your preference.
The importance of monthly management accounts
Up-to-date and accurate financial information is essential for the sustainable growth of any business.
Monthly management accounts provide businesses with valuable insights into their financial performance. They help identify areas for improvement and allow them to make informed decisions based on the data.
Some key benefits of monthly management accounts include:
- Performance monitoring: These reports allow you to monitor your performance against set goals and objectives, helping you identify areas of concern and take corrective action as required.
- Resource allocation: By providing information on revenue and expenses, management accounts enable you to allocate resources more effectively and make better investment decisions.
- Budgeting and forecasting: Management accounts can provide the necessary data to prepare budgets and financial forecasts, helping you plan for the future and manage cash flow effectively.
- Risk management: By identifying financial trends and potential issues, management accounts can help mitigate potential financial risks.
Monthly management accounts example: key components to include
While there’s no set format for monthly management accounts, certain essential components should be included to ensure the reports provide valuable insights into the business’s financial health. You may want to consider including:
Key Performance Indicators (KPIs)
KPIs are a crucial part of measuring and monitoring the performance of a business and could be a key part of your monthly reports. They can include metrics such as revenue, gross margin, operating margin, net profit, and cash flow.
The KPIs you choose to track will suit the specific needs of your business and may vary depending on the industry, business size, and strategic objectives.
Profit and loss statement
A profit and loss statement is a vital component of monthly management accounts, as it provides an overview of your revenue and expenditure over a specific period.
This information is crucial for understanding the company’s financial position and answering questions such as:
- Are we making a profit?
- How do our revenues and expenses compare to our budget?
- How does our financial performance compare to the same period last year?
Having a clear understanding of these figures allows you to make informed decisions, identify trends, and maintain control over your business’s financial health.
Cash position
Cash flow is the lifeblood of any business, and even the most profitable companies can face challenges if they don’t have enough cash to cover their expenses.
Your monthly management accounts should include an overview of the cash position of your business to help you make more informed decisions regarding budgets, investments, and borrowing needs.
Balance sheet
A balance sheet provides insight into the financial health of your business at a specific point in time. It includes information on assets, liabilities, and sources of finance, giving you a comprehensive overview of your financial position.
Including a balance sheet in monthly management accounts is essential for understanding the overall health of the business in a comprehensive way.
How Edwards can support with the preparation of monthly management accounts
As chartered accountants, one of our key focus areas is helping businesses achieve their goals, and monthly management accounts can help ensure you stay on the right track.
If you’re looking to get the most out of your monthly management accounts, or wondering where to start, working with specialists can make all the difference. Wherever you are in your business journey, we are here to guide you.
Get in touch today, and find out how we can help you to understand the best reports for your business and get the most out of your management accounts.
