Management accounting is used to provide real-time information for the managers and leaders of a company, enabling them to make decisions on a daily basis. Reports areproduced that outline details of revenue, orders on hand, accounts receivable and payable, trend charts, inventory and much more. Although management accounting isn’t mandatory, it is a valuable tool for any business.
Why do you need management accounts?
To be able to make effective decisions on a daily basis and drive a business forward, managers of a company require financial information and data indicating the performance of the business in different areas.
An event hire business may have particular venues that have a higher demand than others, or have seasonal demands that will be highlighted by management accounting reports. There may be a demand for other services associated with event hire, and management accountants will highlight this. Using forecasting, it will be possible to predict future revenues, enabling managers to make effective decisions about expansion.
What are management accounts?
Different areas of the company will have various requirements for management accounting. The business areas may include employees, purchasing process, the sales process and a register of fixed assets.
The performance of a particular business area will be measured by Key Performance Indicators (KPIs), which monitor the success of an activity. Any problems identified will have an action plan, so that weaker areas can be strengthened.
A profit and loss account will be produced and compared against another period, usually the previous year, so that a comparison can be made. Information about cash flow and working capital will be produced, along with forecasts based on historical information and current trends.
The costs of the company’s services and products will also be studied, so that decisions can be made about pricing. Although event hire is a competitive sector, pricing too low can have a negative impact on profits.
What will your management accountant do for your business?
A management accountant will make sure that managers understand the meaning and impact of financial information, so that decisions can be made based on facts rather than assumptions. Risks will be identified and managed using current data and forecasts. A business strategy will be formed using the relevant data, along with key financial information.
A business that is efficient and successful often relies on management accounting. For more information on this complex area, please give us a call today. We will be happy to assist your needs further with a non-obligation discussion to help your business grow.