Management Accounts
Also known as the
management pack, what is it and how does it help me?
This pack usually includes for profit and loss, statement of financial position and cashflows for the month/period under review. As a value-add we also include and accountant’s letter as the forehead to explain to our clients what happened during the month, what was great and what could be improved to match their business financial goals. This pack is useful for a few things.
1.
“Screenshot” of the business finances for the
month
Each month is different, and each month has different patterns and attributes to it. The pack details how your finances look as at the end of that month, how much was spent and on what as well as income generated. Based on your accounting policies and procedures, the report in entirety would outline how much value the business was able to create, not only in terms of profit.
2. Tax and cashflow planning
This is more useful for VAT vendors especially as they need
to submit and possibly pay the Commissioner every two months or so. To avoid
tax surprises, looking at the cashflow statement would explain in what
categories is the cash being spent (is it capital in nature) and the total
outflow in comparison to inflow. In an ideal scenario, the inflow exceeds the outflow.
Hint: After each management pack meeting with your
accountant, save the tax portion in a separate pocket (could be a different
account altogether) so you can pay your taxes comfortably. This applies to all
the tax types you are registered for.
3.
Goal tracking
Remember that budget you set at the beginning of your
financial year? This is an ideal time to match actuals to budget. For
businesses that want to decrease expenditure by 10% and increase revenue by
20%, the profit and loss statement is a good place to start looking where we
can ‘trim the fat.’ Having a second forecast also helps you to re-direct the
ship once the wheels are in motion and a few things you hadn’t anticipated has
affected your performance.
4.
Financing
The reason why some companies come knocking at our door is
because they are looking for financing and the lender requires annual financial
statements and management accounts. Having a pack ready consistently makes the
process go faster as you are always ready and knowledgeable about your business
finances.
5.
Accounting “guru”
Lastly, going through your accounts makes you more
comfortable and upskills your understanding of accounting and how it affects
your business. This way you can have more effective meetings with your
accountant to steer your business in the right direction.
With that being said, your accountant is your friend and not
the auditor whose door you need to knock on only when you are in hot water.
Speak to us, we are always ready to listen 😊