There comes a time in every business’s development when good accounting becomes integral to strategy and growth. But while management accounting can be a valuable tool, you might not be at the stage where in-depth financial reporting is necessary.

Wherever you are in your business journey, you need a practical solution for managing your finances and formulating growth strategies. Here are some tips to help you stay on top of your numbers without management accounts.

 

Keep an eye on your cashflow

Understanding cashflow is vital for businesses of all sizes. Keeping a close eye on your cashflow can help you better understand your organisation’s fiscal health.

Cashflow forecasting provides a projection of the cash entering and leaving your business, enabling you to predict liquidity challenges and make informed decisions about potential expenses, investments and growth opportunities.

Benefits:

• Avoid financial hiccups: Predicting potential cash shortfalls ahead of time means you can take steps to prevent them.
• Strategic growth: By knowing how much cash you have on hand, you can make better decisions about when to invest or scale your business.

How to get started:

• Software and spreadsheets: Utilise accounting software or spreadsheets to monitor how cash flows in and out of your accounts.
• Stay updated: Circumstances change in business, so you need to update your forecast regularly to ensure it’s as accurate as possible.

 

Profit and loss statements

A P&L statement provides a vital overview of your revenues, costs and expenses during a specific period. It offers insights into your company’s profitability and areas of expenditure.

If you run a limited company, you must draw up an annual P&L statement by law, but unincorporated businesses can still benefit from this financial statement.

Benefits:

• Transparent financial health: A regular check of your profit and loss clearly shows where your business stands financially.
• Informative insights: Your P&L statement will tell you if particular sectors of your business (e.g. a product line or service) are underperforming or if certain expenses are higher than expected.

How to make the most of it:

• Consistent reviews: Instead of waiting for year-end, review your P&L statements monthly or quarterly. This regularity can help you spot trends and make necessary adjustments.
• Analytical approach: Just because you’re not using management accounts, it doesn’t mean you should stick to the basics. For instance, if there’s a sudden spike in expenses, you need to understand why and how to address the problem. Analysing your P&L statement can help you make better-informed decisions.

 

Keep an eye on key performance indicators (KPIs)

The phrase “key performance indicators” (KPIs) is more than just industry jargon. Every business has unique objectives – KPIs are quantifiable measures used to gauge performance about those objectives.

Whether you’re tracking sales growth, monitoring customer satisfaction, or monitoring inventory turnover, KPIs provide a clear framework to assess how well you’re doing.

Why they matter:

• Objective analysis: Following your gut instincts can sometimes lead you astray. KPIs provide concrete data, guiding your choices.
• Target setting: Setting clear KPIs can help set and track targets, ensuring your business stays on course to achieve its goals.

Maximising KPI insights:

• Relevance is key: You don’t need to track everything — especially if you don’t have the time to do so. Choose a few KPIs that are relevant to your business and align with your strategic goals.
• Consistent monitoring: If you use KPIs in your business, you’ll need to track and analyse them regularly to spot potential issues or growth opportunities.

 

Regular account reconciliation

Regularly reconciling your accounts can ensure that your financial records reflect your financial position.

Reconciliation ensures that two sets of records match. It verifies the accuracy of financial transactions and guarantees that account balances are correct.

Why it’s essential:

• Spot discrepancies: Mistakes happen. Regular reconciliation can help spot them before they become costly problems.
• Financial clarity: Accurate records represent your business’s financial state, aiding decision-making.

Efficient reconciliation:

• Keep good records: Working with an accountant and using cloud accounting software to reconcile your accounts automatically can make the process easier and less time-consuming.
• Routine checks: Instead of quarterly or annual reconciliations, consider reconciling your accounts on a regular basis. That way, you’ll flag any discrepancies earlier on.

 

Work with a trusted adviser

A trusted accountant or business adviser can handle all your accounting tasks for you. They can also interpret your financial data, providing key insights into your business’s fiscal health and performance.

Why it’s beneficial:

• Clarity in complexity: An adviser can decipher complex data, helping you understand the financial dynamics of your business.
• Strategic guidance: As well as providing greater financial clarity, your adviser can draw up strategies to help guide your future endeavours.

Making the most of their expertise:

• Regular consultations: Don’t wait for a financial crisis to reach out to an accountant. Regular meetings with a financial expert can help you stay on top of your numbers and preempt potential challenges.
• Open communication: Ensure you communicate your business objectives clearly. The more they know, the better their advice will be.

 

Summing up

It’s certainly possible to stay on top of your numbers without management accounts. But what if you want to take your business to the next level?

At HW Associates, we can handle your accounting tasks for you, no matter how straightforward or complex they may be. We’ll keep an eye on your cashflow, draw up strategic insights and help you make well-informed business decisions that move your business forward.

Get in touch with our team to find out what our business services can do for you.