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Management accounts are important accounting statements and information. Contained in them are information about profit and loss account, balance sheet, and cash flow forecast. Beyond preparing them, it is important for the management to study management accounts because of their importance to effective business operations.
Management accounts help business owners to work hand-in-hand with better information. This will, in the long run, help them to make an informed decision. Also, management accounts give business owners more control over the business. As a result of being able to clearly see operating margins, sales volumes and stock levels, owners will be able to decide on which internal and external resources to bring in.
Similarly, management accounts help a business to grow more effectively. When your management accounts are well prepared and the details accurately presented, you will be able to see downturns and plan for growth where necessary.
In addition, management accounts help to reduce the cost of annual audit and accounting costs. Definitely, you will be required to present information that relates to the financial position of your company by an investor, auditor or tax authority. We usually recommend that it is settled on a weekly or monthly basis in order to be able clear any discrepancy that is likely to occur. What happens when you have to wait until the end of the year to do so? It all becomes too enormous and quite impossible to track all the financial activities of the business from one period to another. If you are not careful, you may be sanctioned, end up paying high tax charges and possibly, lose investors. Other importance of management accounts includes improvement of cash flow, tax planning and management and cost reduction. Going by these benefits, you will agree with us that you cannot afford to take the business of management accounts with brevity.
It is often hard to combine management accounts with other enormous business requirements. Hence, it is best to hire an accountant to handle it or rather outsource. Whichever one you choose, what is important is ensuring that only the best hand is trusted with it.
Nordens can be trusted to handle your management accounting obligations in the most effective way possible. We are an exception because of the fantastic team of accounting experts. Instead of looking forward to producing historical management info by the end of a financial year, you can trust us to employ our analytical tools in recording your financial activities promptly.
Meanwhile, we will not stop at simply preparing your management accounts for you. We will take you through the process on a consistent basis so that it will be quite easy for you to engage your potential investors, auditors and tax authorities.
Similarly, we will always employ our own understanding of the relationship between management accounts and business growth to provide you with a review of key indicators. These indicators are the ones that will likely assist your business in effective operations. Our business solutions are available. You can get in touch with Nordens to find out how we can help your business.
What are management accounts?
Management accounts are the nucleus of every business firm. They are a set of summarized information from a company’s balance sheet, cash flow and income statement. Management accounts are prepared weekly, monthly or quarterly. However, due to the usual challenge of tracking financial activities over a period of time and the usual issue of inconsistency of figures, it is advisable to stick to weekly preparation of management accounts. When management accounts are well prepared, a company is in a good position to make an effective managerial decision and also avoid unnecessary account auditing costs when the need arises.
What is difference between management accounts and annual accounts?
Both are important to any business but different to some degree. Well, management accounts are prepared all year round to provide information about the financial position of a business organisation using the balance sheet, cash flow, income statement, among others. Not only do they show the financial position of the organisation, but they also help to make an important operational decision. On the other hand, annual accounts entail formal statements about the activity of a company over a period of operation. Annual accounts are mandatorily a legal requirement while management accounts are not legally required. State legislations and regulators require the preparation of annual accounts.
What are management periods?
Management periods refer to the period in which managerial accounting statements are required to be produced. Due to the fact that management accounts are not a legal requirement, there is no time limit. Nevertheless, it is advisable for business owners to generate the reports within a weekly or monthly period. In as much as it is still important for effective business operations, engaging potential investors and dealing with tax obligations, a business will save itself from excess costs when management accounts are readily available. Since no one can tell when it will be needed, it is best to adhere to a weekly or monthly period consistently.
What are opening balances?
At the end of every business year, accounts are settled and closed. Then another accounting period will start. The amounts which a business has at the start of another period of time are called opening balances. Meanwhile, the business year does not automatically mean the end of the year. It may be a new accounting period for your own business or when a new accounting method is adopted by the business. The opening balances of a business are always clearly stated in the trial balance and it must be equal on the debit side and credit side of the entries.
What is closing stock?
Closing stock refers to raw materials, work-in-progress and finished goods inventory which a business firm has as at the end of a financial reporting period. Closing stock is also described as ending inventory. When there is proper count, closing stock can be used to ascertain the cost of goods sold during a business year, to show the number of unsold stock as well as the monetary value. Small business firms can do physical counting but for large business firms, it may be challenging to adopt such a method. Management software can be used to ascertain the amount of closing stock.
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In November 2002, having sold our other business interests off earlier in the year, I decided to set up Nordens Chartered Accountants. The easy part was knowing how to do it, as I had established and built a smaller practice a few years earlier, the difficult part was not following the traditional accountancy path. Having run businesses, both successfully and unsuccessfully, I wanted to help business owners resolve their short term problems and work with them to achieve their longer term goals. Business has always been my interest and I love that I can help business owners achieve what seems like the impossible every single working day.
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