Running a small business right now might feel like the odds are stacked against you and six in ten small businesses are shutting their doors within their first three years, according to the UK Office for National Statistics.

It’s not easy to keep your operations running and margins on track when you’re not even sure of how your business is performing.

Those who are surviving and continuing to grow are the ones who truly know their business inside and out and this should start with your management accounts.

What are management accounts?

Management accounts are financial reports that give you real-time data on your business’s performance.

These are created monthly or quarterly and are not to be confused with statutory accounts, which are created once a year.

These accounts often include:

  • Profit and loss reports
  • Balance sheets
  • Cashflow statements and forecasts
  • Key Performance Indicators (KPIs)
  • Budget comparison
  • Analysis of trends

Why are small businesses struggling?

We’re seeing too many small businesses running into trouble because they lack financial clarity.

Not being aware of potential cash flow issues or rising costs means they can quickly snowball into something that is much harder to fix later on.

You need to have regular reporting by your side so you can make sure you are not missing the early warning signs of declining profitability or overspending without realising.

How can management accounts benefit your business?

Cash flow

Management accounts allow you to see where your money is coming in and out and this can help you anticipate any gaps or cash shortages before they become a problem.

It allows you to build realistic forecasts and budgets and this is crucial for setting achievable targets for your growth.

Forecasting can also help you plan for any quieter periods or downturns. You can check if you have enough money in the bank to build a cash reserve as a safety net for any unexpected costs.

Knowing exactly where your numbers lie can sometimes help avoid last-minute borrowing, which is what every business hopes for.

Decision making

You don’t have to wait around until year-end to look at your data or go in blind when making decisions on the future of your business.

These real-time reports allow you to respond immediately to any changes in performance.

It also means you can feel confident in your next move, whether it be adjusting your pricing, reducing costs or investing in your growth.

Profitability

Management accounts break down your costs, revenue streams and spot which areas of your business are actually making money.

You can then refine your strategy to make sure you are driving profits and see where any unnecessary costs can be cut.

Performance tracking

KPIs and budget comparisons can all help you measure your progress against your goals.

If sales dip or expenses unexpectedly rise, you can spot it early and take action before it escalates.

Credibility

If you’re looking to raise finance or secure funding, detailed management accounts can give you the evidence that stakeholders need.

They can prove to lenders and investors that your business is growing and heading in the right direction. This will allow you to stand out and make your business a much more attractive investment.

Let us help you

All these benefits sound great on paper, but you need to make sure you are implementing them and this is where we can help.

Our professional team can prepare detailed financial reports for your business and make sure your data is accurate and compliant.

We can break down what the numbers mean, potential trends, risks and growth opportunities, so you can focus your plans on these.

We can also support your budgeting and forecasting and make sure you are staying on the right track to growth.

Businesses are already fighting tooth and nail to stay afloat and you should be taking the lifeline that management accounts can offer.

For further advice on your management accounts, get in touch.