A plain guide
What are management accounts?
They're the numbers you run the business on during the year. What goes into them, how they differ from your annual financial statements, and what a good set should tell you.
The short answer
Management accounts are reports made from your books during the year, usually every month or every quarter, so you can see how the business is doing while there's still time to act.
They come from the same books your accountant keeps. The difference is who they're for. Annual financial statements look back at the year, for tax, the bank and the shareholders. Management accounts are for you, to decide what to do next.
What goes into them
Income statement by month.
Sales, costs and profit, month by month, against last year or your budget.
Balance sheet.
What the business owns and owes, so you can see where the profit went if it isn't in the bank.
Cash flow.
Money in and out, and what's coming, so a short month doesn't arrive as a surprise.
Debtors and creditors.
Who owes you, who you owe, and for how long.
A few key numbers.
Gross margin, net margin and how long clients take to pay, tracked over time.
Management accounts or annual financial statements?
Management accounts
- For you and your managers
- Monthly or quarterly
- Ready within weeks of month-end
- No set format and no audit
- Answer: what should we do next?
Annual financial statements
- For tax, the bank and the shareholders
- Once a year
- Ready months after year-end
- A set format, audited or reviewed where the law requires it
- Answer: how did the year turn out?
What a good set should tell you
Most management accounts stop at the numbers. A useful set answers three questions.
How did we do?
The headline numbers, against last month, last year and the plan.
What moved, and why?
Which jobs, clients or costs changed the result, in rand, not only in percentages.
What should we do about it?
Three things to act on before the next set arrives.
That's what a Konzult Snapshot is.
A clear report from your books, quarterly or monthly: the headline numbers, what moved and why, three things to act on, and a short call to walk you through it.
From R750 a month, after a First Look at your books.
Questions about management accounts
- How often should management accounts be prepared?
- Monthly, for most businesses that want to steer by them. Quarterly works for smaller or steadier businesses, as long as the books are kept up to date.
- How soon after month-end should they be ready?
- The sooner the better: within two to three weeks is useful. Books more than about two months behind can tell you what happened, but not in time to change it.
- Are management accounts audited?
- No. They're internal reports, so there's no required format and no audit. That's why they can be shaped around the questions you're asking.
- Who prepares management accounts?
- Your accountant or bookkeeper keeps the books. Management accounts can come from them, from a finance person on your team, or from someone like us, reading the same books alongside your accountant.
- Do I need management accounts if I have an accountant?
- Your accountant makes sure the books are right and your tax is in order. Management accounts use those same books for the decisions in front of you, month by month.
- What would you need from us?
- Your income statement by month, balance sheets, and aged debtors and creditors. Sales by customer or product, if your system has it. Your accountant can send them.
Start with a First Look at your books.
R3,500 once-off, about two weeks, on the reports you already have. Nothing new for your team to capture.