I’ve recently been working with a number of my clients on their management accounts reporting. Whilst a lot of the discussion has been around the measures and numbers I’m mindful that some work remaining, is centred on ensuring that the numbers coming out of their accounts system are accurate.
There are lots of different accounting systems to choose from today, some offline and other like XERO in the cloud. All offer simplicity and ease of use however, the accounts and information that they produce are only as good as the information that is put into them.
So I would suggest that any review of management accounts information starts with a comprehensive check of the underlying financial systems and procedures; is the bank balanced on a regular basis, is cash checked to what’s in the till or petty cash tin, is depreciation (of fixed assets) posted into the system and are the rates appropriate, are debtor notes reviewed to identify potential bad debts and are they provided for, are prepayments and accruals large enough to worry about on a monthly basis, is the stock balance updated and Work In Progress adjusted, is the VAT balance checked and are the wages and PAYE/ CIS accounts balanced?
Without addressing these points the information you review in your accounting system may not be an accurate reflection of how your business is performing.
A good way to ensure the accounts are accurate is to work to a monthly checklist, a list of tasks that you do each month. When I prepare these for clients I always make sure that they are annotated so that there is a handy “how to” next to each item. This helps take the stress out of updating the system each month and ensures you don’t spend a long time thinking about how to enter information.