Management reports inform the business owner of the key numbers for their business. Every business is different and whilst some key numbers are important in every business each business might like to keep track of a different aspect. Not all management reports come from the accounts but they are a good starting point.
The majority of businesses who choose to work with us have never received management accounts and only really know how their business has done once the accountant has drafted their tax return or statutory accounts several months after their year end. So when we ask if they would like regular management accounts we usually have to explain what these are.
So what are Management Reports?
These reports are an ongoing record of how the business is performing and when compared with previous reports show variances in income and expenses.
When we have completed monthly or quarterly accounts we provide a set of reports appropriate for the business. This will include a report showing customers with unpaid invoices past their due date and outstanding bills to be paid if sales invoices and bills are recorded (not every business needs this though). For each business we will produce a Profit & Loss report which shows income and expenses during the period with a net profit or loss at the bottom as this tends to be the one most business owners are interested in. A balance sheet completes our standard set of reports if we think it is relevant - many business owners are not interested in this.
There are many business owners who would ignore a Profit & Loss report because they don't know what all the numbers mean so we do encourage our clients to come and discuss their reports with us to help them understand what the reports are telling them. It also gives us an opportunity to find out if we can provide them with any additional information which would be useful to them.
Every business has different needs and different key numbers which are important to them. It is therefore important for us, as bookkeepers, to understand which numbers are key and see how we can best produce this. Key numbers need not just be financial but knowing and tracking your sales, expenses, profit and bank balance are a good starting point. Keeping track of your debtors (customers who owe you) and ensuring they meet your payment terms is also key. If you are VAT registered keeping track of and planning your spending within the VAT quarter is also useful.
Profit and loss reports are straightforward to produce from accounts software but, of course, are only relevant and accurate once the accounts are complete for a period. If there are still bank transactions to reconcile or sales or purchase invoices to be added producing a Profit & Loss report will be a waste of time as it will not show a true reflection of how the business has done.
For some of our clients we produce bespoke Profit & Loss reports which show the figures in a more meaningful way for their business. We might produce Department Profit & Loss reports, or include a provision for Corporation Tax, or produce a budget variance report.
One of the clients we have been working with for a couple of years now looks forward to receiving his management reports as he never knew before, except by his bank balance, how his business was doing. These reports now help him to make informed decisions on the growth and sustainability of his business and help him plan the purchase of new equipment.
If you think your business would benefit from up to date accounts and useful management reports give us a call and we can talk through what would help you.