Key Business Information – Monthly Management Accounts
It’s really important to know what’s going on in your business yet many business owners operate completely in the dark, with no meaningful business information available on which to better manage their business and safeguard what is often their most valuable asset.
One of the most important things you should be doing in your business is to prepare monthly management accounts yet very few small and even medium-sized businesses do which, in my view, is a real shame, because old-fashioned and humble monthly financials make a huge difference to business success which can be demonstrated in the very strong correlation between the frequency of financial reporting and business survival:
|Monthly reporting||80% survival rate|
|Quarterly reporting||72% survival rate|
|Half-year reporting||50% survival rate|
|Annual reporting||36% survival rate|
(*) Source: Williams, A.J., A Longitudinal Analysis of the Characteristics and the Performance of Small Business in Australia
So, if they’re so important, why are they not more widely used? After all, now that powerful accounting software is cheaper than a weekend away for two and with so many other benefits (built-in database, timesheets, inventory control, invoicing etc) cost, like it used to be, is no longer an excuse. Let’s look at some of the reasons often quoted and why these reasons are based on false premises:
|Too costly||Oh come on! Accounting software incorporating a full General Ledger (without which accounting software is a waste of time) and inventory control can still bought for under $500. Not buying it may be the most costly mistake you ever make!|
|Too difficult||Modern accounting software does it for you other than one or two small areas you may need your accountant to help with.|
|My accountant says I don’t need them and that they’ll take care of bookkeeping and GST.||Now there’s a common tale! The only reason he or she is saying that is because they want to maximise their fees!|
|Whatever happens in my business just happens anyway so as I can’t influence things what’s the point?||If a business owner thinks that (and yes, I’ve met loads!) they shouldn’t be in business and are probably not long for the world of business. Get a job!|
|We don’t understand our end of year financials yet alone monthly ones||If you want to be successful in business it’s not enough just to be good at your core trade or profession, you need to get to grips with basic financial and business issues. Go on a course, read some books, and get yourself a good accountant who will explain them.|
|We haven’t got the time||That’s easy, delegate it out.|
|We concentrate more on the operational side of the business and don’t need to worry about such minor detail||Many previously successful business owners have said this before they went bust!|
So there really are no excuses not to prepare monthly financial reports. If there was a book of rules about how to run a successful business (I may write one, one day) they would feature well up the list of key essentials!
If you need help to set-up Monthly Financials in your business contact 0800 ASK NICK or email firstname.lastname@example.org.