Monthly management accounts

Monthly management accounts founders actually read vs the ones they ignore — what's the difference?

Monthly management accounts are essential to keep on track with your business, but they need to be more than a set of financial accounts produced each month. Most business owners do not have the time, knowledge or patience to read through a detailed set of financial numbers to work out what is driving the profitability and cash in their business.

A good set of management accounts should be designed for the business and make it easy for business owners and founders to understand the impact of their decisions:

• Performance against budget or forecast – variances and forward-looking predictions help business owners understand performance and where they need to direct their attention.

• A one-page summary, or “dashboard” - with the key performance metrics and important facts and results is easier to digest and understand. The detail can be in the appendices for completeness, for those who need the detail.

• Cashflow forecasts – what will the bank account look like in 60, 90 or 120 days? When will the money run out or are there some really lumpy cash outflows that they need to consider. Which clients haven’t paid their invoices and what’s being done about it?

• Business specific metrics – the key drivers of the business should be clearly set out with variances against budget or forecast. Gross margin by product or customer, customer acquisition cost, cash burn and revenue are some common metrics.

• A short narrative – that explains what the numbers say, the key issues and gains, what is being done to solve challenges and what does the founder need to know before they make a decision. It it’s enhanced with graphs or images, even better.

  
  

Do your management accounts make sense to you? Do you even read them?