If you’re a business owner who thinks that the accounts are something you pay your accountant to look after and any involvement with them is a chore, you probably don’t look at them very often.
Perhaps just at year-end when you’re accountant prepares your CT600 submission for HMRC. If this really is you then you’re missing out on the valuable and actionable insight available through regular reviews of your accounts.
When you started your business, you most likely had some goals. You knew what you wanted to achieve financially. These goals have probably evolved to some degree during the life of the business. As well as goals you should also have a business strategy and plan which shows how you are going to achieve them. Your plan should include objectives which are time bound and measurable.
So there’s the rub; how can you tell how you are tracking against your financial objectives if you are not regularly reviewing your accounts? Sure, you can easily and quickly see how much cash you have in the bank (or how overdrawn you are) without looking at the accounts.
- How can you see how profitable your business is overall?
- Where can you see which of your product lines or services are loss making, even though overall the business is profitable?
- How do you manage your cash flow efficiently and do you maximum advantage?
Assuming you already have goals, a strategy and a business plan with objectives, here are a few tips to get you started:
- Decide what financial indicators and ratios you need to track.
- Work with your accountant to configure a chart-of-accounts which supports the tracking of these indicators. Then configure your accounts software accordingly.
- Define processes within your business which ensure all business transactions (invoices in/out, payments made/received etc.) are entered into your accounting system in a timely fashion.
- Configure the required management reports within your accounts software so that they run automatically (monthly). And send yourself a copy so you know they’ve left.
- Set aside time in your schedule to review the management accounts monthly and hold yourself accountable.
You will soon start to see the value in reviewing your accounts regularly.