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Using Management Accounts Effectively

Video BN8

Using Management Accounts Effectively (BN8)

Hello, my name is Eve from Business Nirvana, today I am going to discuss how to monitor the effectiveness of your management accounts.

We established in the previous videos that every act and decision that occurs within a business has a financial consequence and a numerical value. We discussed that the management team can decide how to view or utilise this numerical information as a means of making sensible business decisions and that this information is contained within the management accounts.

One other thing to reiterate is that software and people make mistakes and so a system of micro audits should occur to check the integrity of data. This could include test purchasing of product via the ecommerce system through to a traditional stock take.

In short we have agreed that the information contained within ones management accounts must be meaningful to the managers, accurate and delivered in a timely manner in an easy to understand format.

So now we need to consider how best to use this information.

Before doing so let’s just remind ourselves that most businesses that have gone into liquidation have had “trouble with their management accounts.”

 As we have now resolved the issues of data integrity - trouble in this context might be as simple as failing to use your management accounts as an aid in making business decisions.

As all businesses as with people are unique; your management accounts will be unique and how you use them will also be specific to your business. There are however one or twom fundamentals that must remain the same.

  1. Ensure that the monthly management meeting happens on the same day each month and that the dates of such meetings are published months in advance.
  1. Distribute the management accounts to key personnel at least 48 hours prior to the monthly management meeting. This will enable the managers to question them / challenge them and / or find answers.
  1. Use your management accounts as a basis for your monthly management meetings (and more frequent weekly meetings if your business model desires)
  1. Minute your management meetings and start each monthly meeting by reviewing the minutes of the previous.
  1. Create and agree a plan of actions; based on the information contained within your management accounts.
  1. Management accounts (or sections of them) should be followed by sub meetings with other team members to re enforce an act or decision.
  1. Share your management accounts with your chartered accountant; It is often sensible to invite your chartered accountant to quarterly meeting or annual board meetings.
  1. Promote your management accounts with your bank manager and aspects of them if they are likely to win the confidence of a supplier, customer or investor.

Thank you for watching this video. Please share now if you think that it could be of use to others and if you have any questions please do not hesitate to ask?

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