Running a small business isn’t always easy. Not only do you have to work hard to establish yourself in your chosen industry, but you must constantly fight against the statistics of small businesses failing.
It is predicted that around 20% of new businesses fail within their first year, which means that there is a lot of pressure on new businesses to do well and manage their business properly.
Arguably, one of the most complex and tedious aspects of owning a business is money management.
It can be easy to let your finances slip your mind, but that can later lead to problems and make it difficult to regain control of your finances. This is why it is so important to ensure that you have management accounts in place and also work alongside well-versed qualified accountants.
At Tax Driven Accountants, we have supported countless businesses in managing their accounts, and we know how important the right support is for small businesses’ success.
Keep reading to learn more about management accounts and the benefits of working with expert accountants.
Why Some Small Businesses Struggle to Grow
Cashflow problems are one of the leading causes of small business failures. Issues such as late payments, irregular income, and poor financial management can be detrimental to small businesses.
Poor management tends to be the main reason these small businesses struggle financially. New companies often struggle to maintain clear control and accountability of their finances, and by the time they start to suffer from this lack of control, it is too late for them to make a real difference.
This is why quarterly management accounts are so important, as this allows small businesses to remain accountable for their finances and provides them with valuable financial insight.
What Are Management Accounts?
Management accounts are internal financial reports used by business owners to track their businesses’ performance, plan for the future, and make informed, strategic decisions. They are tailored to meet the business’s needs and prepared either monthly or quarterly.
These accounts provide an overview of a company’s operational and financial performance, allowing businesses to make informed decisions.
Given the importance of management accounts for internal business management, many organisations seek management accounting services like ours.
Why Are Management Accounts More Beneficial Than Statutory Accounts
Management accounts are considered to be generally more beneficial than statutory accounts. Statutory accounts are financial reports that businesses are legally required to prepare annually and file with Companies House.
These reports provide an overview of a company’s financial activities and can be used to create a projection of their performance in the next financial year. However, because these reports are only drafted annually, they do not provide an accurate picture of how a business is doing month by month, so it is always recommended that you maintain management accounts.
How Management Accounts Will Benefit Your Small Business
Management accounts allow you to have full transparency and control over your business’s success. They enable you to maintain an up-to-date picture of your business’s financial health, allowing you to make informed decisions about its health.
Some of the ways that management accounting may benefit your small business include:
Cashflow Monitoring
Management accountants help create detailed cash flow projections, tracking your business’s inflows and outflows. If you are working with a certified management accountant to manage your business finances, they will analyse cash flow trends and help you identify potential issues and opportunities.
Monitoring your business’s cash flow is always a good idea, as this can help you properly manage your business in a financially beneficial way.
At Tax Driven Accountants, we work with a range of businesses on their quarterly management accounts, ensuring that they have the knowledge to make better financial decisions.
Better Decision Making
In business, it is important to make informed decisions, and management accounts provide you with the resources to do so. Because you have financial insights, you can evaluate your business’s performance and create a business plan for the future based on these insights.
If you identify any inefficiencies in your business, you can then proceed with these in mind and make changes that will benefit your business’s operations.
Cost Control and Profitability
All businesses aim to make a profit. With management accounting, you can create profit forecasts and determine budgeting processes that meet your business’s strategic needs.
It’s impossible to control your costs and make steps towards profitability if you are not fully aware of your outgoing and incoming expenses. This is why it is essential to keep a complete record of all of your costs and sales, as this can give you an accurate picture of how your business is doing.
We understand that keeping records can be difficult, which is why quarterly management accounts are so beneficial. They are much more manageable, especially if you are doing your bookkeeping with an experienced accountant.
Preparing for Growth or Funding
Through your management accounts, you can demonstrate the possible growth potential of your business to potential investors. If you want to grow or expand your business, you are going to need financial backing, but investors can be reluctant to provide financial support without an accurate picture of the financial state of your business.
If you want to raise finance, you need to have the right information at the ready.
Before investors consider investing in your business, they will want to see data and insights that support your claims of its growth potential. Investors expect to see a business plan with cash flow projections, which will be more achievable with the support of the data collected in your management report and accounts.
Reducing Year-end Stress
The end of the financial year can be stressful for all business owners. It’s a time to wrap up projects, plan for next year, and ensure that all of your accounts are in place. Maintaining your management accounts can reduce year-end stress, allowing for better planning and control of your accounts throughout the year.
Because you maintain regular and accurate records of your finances, you can minimise the time spent on year-end reconciliations and adjustments, allowing you to dedicate more time to the general operations and running of your business.
Tax Planning and Compliance
Every business owner dreads taxes. Tackling them can feel like an impossible task, which is why so many people turn to experienced accountants, such as Tax Driven, to take care of them.
Keeping a well-documented record of your accounts on a quarterly basis will simplify things for both you and your accountant. With clear records of your finances, your accountant will be able to identify tax-saving opportunities and put a plan in place for the next financial year.
Your accountant will also be able to perform a full audit, which will identify any potential tax issues and discrepancies, mitigating the risks of errors and non-compliance within your business.
Customised Reporting
By staying on track with your accounts and delving into regular checks, you have set yourself up to easily create detailed financial reports that pinpoint your business’s unique needs and goals.
Management accounts offer an extensive overview of a company’s financial performance, enabling businesses to generate reports that concentrate on particular areas of interest, like product profitability.
By handing over your management accounts, you will receive an in-depth report that will help you better understand how your business is performing and identify areas for improvement.
Collaborating with an accountant familiar with your business enables them to assist in monitoring product lines and departments, effectively analysing your business’s finances and allowing you to make decisions that benefit your business.
How to Manage Accounting for Small Businesses
Keeping an accurate record of income and expenses is essential for a new or small business. It is encouraged that you keep an accurate record from the moment your business launches, as this good habit will benefit your business in the long term.
We always recommend working with a trusted accountant if you want to ensure full control over your finances, be fully aware of how your business is doing financially, and identify areas for improvement.
They will not only keep your finances organised but also hold you accountable, collaborating with you to enhance your financial situation and boost your business’s success.
Working with a local accountant who is experienced in UK regulations is also beneficial. They can inform you on the best financial practices and help you stay compliant with UK financial and taxation regulations.
Keep Your Business on Track with Tax Driven Accountants
At Tax Driven Accountants, we specialise in supporting businesses with their accounts and taxation. We are firm believers in the impact that management accounts can have on a company’s success, which is why we pride ourselves on helping clients start and maintain management accounts.
Are you looking for financial support for your business? Do you want to ensure that all of your taxes are in order? Contact our team today and book a free consultation for your business.
