Business owners and their management teams face a huge number of decision-making situations on a daily basis, so accurate management accounting is essential for providing insights and business information. Management accounting uses your ongoing business information to produce reports on subjects such as business performance, profits margins and labour utilisation. Using this valuable source of information helps leverage better business deals and increases the profitability and performance of any business.
Uses for management accounting
You can utilise your management accounting information in a number of ways, including determining product costs and ways and means of focusing marketing or sales operations via relevant cost analysis.
The key performance indicators (KPIs) highlighted within management accounting information will ensure that the business owner remains in control of the business at all times and are a good way of implementing financial controls throughout the organisation.
Management accounts can be produced on a regular basis, to suit your business requirements. Whether monthly or quarterly, they allow management teams to understand the financial status of the business throughout the trading year and ensure there are no hidden surprises at year end when the financial accounts are prepared.
Use of management accounting helps cut the costs of preparing year-end financial accounts, as all figures are maintained on a regular basis.
Businesses utilising management accounting will find it much easier to identify adverse trading conditions at an early stage and put plans in place to rectify the situation. There could be times when a business is operating with a healthy bank balance, yet current trading situations are likely to contribute to huge shortfalls in cash within just a couple of months. Your management accounts will identify sales trends, costs, profits and operating margins, allowing you to make the best business decisions at all times.
Where make or buy analysis is utilised, business owners have the tools to ascertain whether it’s more profitable to produce or buy in the components required within the manufacture of the business’s primary product.
Activity-based costing allows business owners to determine the most profitable customer base and costs out the activities required to produce and service product ranges.
Ultimately, management accounting gives any business owner the tools required to grow the business, by way of a variety of information, including budgeting, financial projections and company scorecards.
Get in touch with Highwoods & Associates today
Highwoods & Associates provide professional management accounting, tax accounting, auditing and financial accounting services to London businesses based in the Shoreditch and Dartford areas. Contact us for more information.