What really are management reports? Is it not what my Accountant produces at year-end? NO!
Alright, let's have a look at your management reports for August'18," this was the start of a conversation which provoked us to write the post. Blank stares across the room, and the too inevitable answer , "Yes, our Accountants produce them every year", so the last one they had on hand was for Dec 2017. 8 months into 2018, that information is redundant. We know their Accountants and they are brilliant, they take care of their function extremely well. In fact, we could recommend a few guys over to them for year-end formalities without a second thought.
More often than not, small businesses confuse the concept of management accounting with producing year-end accounts.
A good financial process is a lot like going to the gym, you need to be consistent to be effective.
1. Get into a habit where you catch up transactions weekly. Think bank feeds, expense claims
2. Produce a set of cash flow statements each month. That’s the absolute minimum. If your cash situation looks good, rest assured you're headed in the right direction.
3. Produce a variance profit and loss account. Simply budgets vs actuals on your P&L. Again, if you have a reasonably good accounting software, it should produce this effortlessly. We are used to Xero and it does a pretty good "budgets Vs actuals" which you can run any-time.
4. Have a management meeting once every month. Even if it’s with yourself. Make sure it does not run for more than 45 mins if it’s internal. If you have an outside consultant like an #outsourcedcfo, use the opportunity to plan ahead.
5. If you have the ability to use dashboards, try them out. If you are on Xero and use Barclays for business banking, by all means set up the Barclays business dashboards. Even at a very early stage, it can produce easy insights. If you use more mobiles, apps like Ikooloo can be helpful without breaking your bank.
Every company is different and so are it’s needs. There’s no point forcing this process, because it's only a matter of time before it folds - remember that gym analogy! Determine how important this is to scale and run a more valuable organisation, set time frames and commit to them.