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Management accounting: How does it benefit your business?

 

Management accounting: How does it benefit your

business?

We’re not going to pretend that management accounting is an essential part of running a business. It isn’t. There are no requirements, no legal obligations.

However, from in experience we can confidently say that management accounting is an essential part of running a good business.

Now, whether or not you should actually incorporate a system of management accountancy into your business will depend very much on your size and structure. It’s unlikely you’ll have the need for management accounting if you’re a sole trader, in a partnership or run a micro business. Even if the need is there, these types of businesses tend to struggle with preparing an extra set of financial statements due to the added time and administrative costs.

Nevertheless, when a carefully planned management accounting strategy is used in the right context it can be invaluable for business planning, cost management and ensuring your operations run efficiently. Here are our top 3 reasons why your business is stronger with management accounting:

·         Cash flow control
A key concept in management accounting is creating master budget based on your historical financial data. Having a master budget is important in maintaining a grasp on your cash flow – particularly if your business has multiple departments with separate budgets. These separate budgets will combine into a single budget, enabling you to view your entire company’s incomings and outgoings from one set of figures.

·         Lower expenditure
It’s vital to have an accurate idea of your business’s outgoings if you are going to effectively control your costs. Knowing how much you’re spending is important not just for ensuring your control over expenditure, but for identifying potential opportunities for lowering your overall spending.

·         Better analysis, better decisions
Using the quantitative methods provided by management accounting will result in more informed decisions. Management accounts can provide information on the positive and negative trends in sales, margins, and profits and losses. Having this information available is crucial to making informed business decisions.

We can be your management accountants

Effective management accounting introduces a host of new responsibilities that not all business owners are in a position to meet. Our years of experience in management accounting mean that we’re here to lend you a hand; whether you want to get your cash flow under control or gain access to better analytical tools.

Contact us on 01628 631 056 or email tracya@knightandcompany.co.uk for more information on how management accounting can help your business thrive.