There are usually two types of accounts or financial reports that most businesses will prepare. The first is those required each year by government organisations such as HMRC or Companies House, and these will often be produced in a specfic set format each year and submitted on an equally specific form.
The second type of financial report that a business may look to produce would be for the purpose of it's own internal use, and these would be much more varied in the detail as they are designed to help you understand and improve your business, hence the name of 'Management Accounts'.
Many small businesses don't produce management accounts, more often than not because they believe them to be another administrative task. Even if you are running the smallest of businesses you need to know firstly whether you are making a profit, but more importantly you need to understand where you are making money and whether any aspect of the business needs to be changed in order to make it more profitable.
Whilst businesses are required by law to keep certain financial information, the statutory information does not necessarily help small business owners make informed decisions. Simply checking that the bank balance is positive and then waiting until the end of the accounting year before knowing the financial results of the business is a dangerous strategy.
Management accounts are also extremely useful for keeping a check on cash flow within the business as even the most profitable businesses can run out of cash if it doesn't plan ahead, hence why cash projections and reporting are essential for any business.
At TaxSmart Accounting we work with you to understand and identify what is important to track within the business, and then to complile management accounts that will provide you with the required information for business development.
If you are looking to obtain funding or investment for your business, monthly management accounts can give a lender or investor more insight and peace of mind that the business is being run to a good standard, which can improve your chances of success in securing funding.
Management accounts can be tailored to suit the specific requirements of an individual business, but typically the accounts can include the following items
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