Coleman Bradshaw

Management Accounts

What do you think of when your accountant says "management accounts"?

What's the benefit? I know whether or not I'm making money, as I sell it for more than I bought it for!

What's the point? I've got a small shop, and I know what's in the bank anyway!

What's the point? I do all my books OK anyway! But they (accountant) always seem to charge me more than my mate!

What's the point? I let them have all the records to do my tax return in plenty of time for the January deadline! I mean, it's only a few hours work for them, they don't need it any earlier than 20th January anyway!

The longer I don't know the tax bill (or have their bill) the more I can fool myself that I didn't do all that work last year.

Their fees will be higher!!

As an accountant, let me explain.

Firstly, management accounts are an essential report for EVERY and ANY business, irrespective of size, trade, or how the current books are being kept by clients. If you require finance, the bank will ask for up to date financial information. If you want a personal loan or mortgage, the lenders will require up to date financial information. And, they will want management accounts, not a bag of receipts and a nicely balanced cash book.

Management accounts that are being maintained on a regular basis provide this at the touch of a button.
Secondly, the figure in your bank account does not tell a prospective lender how profitable the business is - maybe your customers paid early this month, maybe you haven't paid your suppliers yet, and maybe you haven't drawn as much out of the bank this month.
Management accounts that are being maintained on a regular basis provide a set of accounts showing profitability at the touch of a button.
Thirdly, maybe that cash book is written up, but a lot of work needs to be put in to changing that book into a set of accounts - we need to bring everything in to the equation. Do you add the book up? Is it correct? Are there any business bank accounts? Are these recorded in their entirety and balanced in the book? Does you book show purchase invoices that you owe and sales that you are owed for at any one point in time?
Management accounts that are being maintained on a regular basis provide a set of accounts showing all of the above at the touch of a button.
If all clients brought their books in on 20th January each year, there would be many £100's being paid to the Chancellor! For the 2007 tax return, any accounts that end within the period from 6th April 2006 to 5th April 2007 will go on it. So, if you have 30th April as your year end, 30th April 2006 will go on that return. And the 2007 tax returns need to be submitted by 31st January 2008 to avoid the £100 penalty. So, that's nearly a 21 month delay between year end and delivery to accountant. And, if you want that loan in January 2008, the lender will want something that is more up to date than 30th April 2006.
Management accounts that are being maintained on a regular basis provide a set of accounts at the touch of a button.
It is better to know the tax bill as soon as possible - it provides time for clients to put money aside. We have more time to pro-actively tax plan.
Management accounts that are being maintained on a regular basis provide a set of accounts showing profitability at the touch of a button. So, at any point in time, we can assess the profitability, and let you know in advance what the likely tax bill will be.
Accountants' fees will be slightly higher than in the past - BUT, they will actually be more valuable for money. We turn into reporters of the current situation and forecasters of the future instead of reporters of the past, which is a lot more beneficial and helpful to you. We are up to date - no more racking your brains trying to think what that cheque for £100 was for back in September 2000. It means a year's worth of work is cut down into 5 chunks - 4 lots of management accounts (that tie in with the VAT quarter for all the VAT registered traders, which is handy, as you can have the weekend that leads up to the due date back again - the accountant does the VAT return as well...nice), and the final 1 for the actual year end tidying up. Needless to say, the fees will therefore be cut into 5, so that will ease your cash flow no end. You get more for your money.
Management accounts that are being maintained on a regular basis are value for money.
If you would like to know more about the benefits of having regular management accounts, please do not hesitate to contact us.
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