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You’re running a business, so you know the legal requirements around producing accounts and submitting accurate BAS and tax returns. You can read a Profit and Loss report. But
As a business owner, managing director or CEO, there are three main areas of the accounting proposition that you’re probably most interested in:
- Compliance work – this is the bookkeeping, financial accounting and tax work that’s legally required for you to be compliant with the law. On the whole, this compliance work looks backwards at your numbers from the past (your ‘actuals’), showing you where you have been, rather than where you are going.
- Financial performance work – this is the work that aims to improve the financial health of your business. It includes the cashflow, cost management and funding work that helps you to strengthen your balance sheet, manage your working capital and become a more stable financial proposition. The work, again, is based on your historic actuals but also has an element of forward-looking forecasting and projections.
- High-value advisory work – this is the forward-focused, high-level strategic advice that helps you look to the future and plan out your business. This can include helping you to define your personal and business goals, create a 5-year business plan, manage your company strategy and focus on growth, value and an eventual exit strategy etc.
How does a management accounting differ from financial accounting?
Management accounting still uses the same data but looks forwards rather than backwards. The focus is on the future. Management accounting delves deeper into the financial performance and high-level advisory work. Rather than just ‘counting the beans’ they help you choose the right beans, decide how to plant them and make sure you nurture and grow these beans to bring in a better (and more profitable) harvest.
Looking to the future is a far more productive way of managing your finances than just counting what’s in the bank. Management accounting will empower you to understand your business and help you make good, well-considered decisions.
With an experienced bookkeeper providing you management accounting reports working alongside you, your financial thinking can be completely revolutionised.
For example, you will:
- Stop looking backwards – your focus will be all about looking forwards to what you can change, not just recording your past transactions (the things you can’t now change, even if you wanted to).
- Know your numbers inside out – you’ll have a far better understanding of your regular finances, thanks to the detail included in your regular monthly management accounts.
- Get in control of your cashflow – you’ll be able to drill down into your cash inflows and outflows and, by doing so, improve the liquid capital and cashflow in the business.
- Streamline your financial processes – you’ll refine and improve your internal accounting procedures, so you’re more efficient and more productive.
- Refine your pricing strategy – by reviewing your pricing model, you’ll be able to enhance your margins, boost revenue and make the whole company more profitable.
- Stop unnecessary expenditure – you’ll analyse your overheads, expenses and cost base to reduce the money that’s leaking out of the business.
- Bring more money and investment into the business – with more robust accounts and projections, you’ll have better access to funding and to private investment.
- Get a firm grip on your business data – with meaningful metrics being tracked and monitored through your cloud accounting platform, you’ll greatly enhance your business intelligence and the evidence behind your decision-making.
Talk to us about the benefits of management accounting for your business
If you’re ambitious and keen to grow, switching to the benefits of management accounting could have a huge impact on your future destiny.
Get in touch to talk about management accounting. Book a chat.
This post was originally written by BOMA and has been updated to make it more personal.
