So who needs management accounts anyways?
Hands up if you’ve ever thought your time would be better spent not going to that exco meeting to discuss last month’s numbers? That’s history now anyways, right? Wrong.
Looking at numbers can be a little boring, but if you really think of it, those numbers are telling you a story. A story full of intrigue and the ups and downs that business often is. If your business strategy is your map to where you need to go, your monthly management accounts will tell you how close you are on your journey.
Much like a GPS will reroute you if you’ve taken a wrong turn, so your monthly management accounts will do the same. Sales down on forecast? Operating expenses higher than your plan requires? That’s a deviation that needs to be looked at. Unfortunately, there’s no pre-programmed voice at your desk that tells you to make a u-turn. The closest you’ll get to that kind of feedback is looking at those numbers and asking them some questions.
You’ll also know that the longer you take to make that u-turn the longer it’s going to take to get back to where you need to go. And these things can become exponential. And unfortunately, there’s no other way to do it than to hold fixed, set sessions where the whole team goes through the detail. You owe it to yourself and your business.
We generally see two types of companies in our business. Those that prepare regular, accurate and timely management accounts. And those that don’t. The difference in dealing with these companies is often staggering.
Those that prepare regular accounts are generally profitable, cash generative organisations that know exactly where the money is coming in and going out. They know who they owe money to and who they don’t. They can also see the headwinds coming before anyone else, simply because they have the information, they need to make decisions.
Those that don’t prepare regular accounts often just don’t know which operations are making money, which ones are losing money and what buttons to push to change things.
Running a business today is much like flying a jumbo jet. Just think of all the dials and gauges in the cockpit of an aeroplane! Imagine a pilot trying to fly a plane with half the number of dials or the dials the pilot has only being updated every couple of minutes or on an ad hoc basis. Planes would be falling out of the sky every other day. Spoiler alert: the exact same thing happens in your business. You are the pilot/executive in your business, and you need the right info at the right time to fly/run your business.
So, make management reporting and regular reviews of the info with your team a top priority in your business. This is as important as getting that urgent order out to your customer. It’s one less reason that can cause a turbulent flight for your business (which is tough as nails to run on a good day).