How can you make better management decisions?

As a business owner, if you want to make effective decisions you need to have the most up-to-date financial information.

The preparation of accurate and timely management accounts, supported by business intelligence created by the latest digital accounting systems, is an essential part of running a modern successful business.

As we enter a period of challenge and uncertainty over costs, trading and profitability, there has never been a more crucial time for business owners and their management team to keep on top of their performance.

Key performance indicators

An important part of gathering management information is establishing and monitoring key performance indicators (KPIs).

These enable you to benchmark your performance against others in your sector and your previous performance to identify areas that need to be improved to increase your cash flow, profitability or the value of your business.

In our experience, the highest performaning businesses have developed their most relevant KPIs and regularly assess their performance against them, enabling them to significantly improve their profitability and cash flow.

Your KPIs could include some or all of the following:

Profitability
Wages and staffing levels
Utilisation rates
Efficiency and wastage
Lead conversion
Cash flow
Debtor days
Creditor days
Stock turn
Liquidity ratio

Getting analytical

To get the most out of your management information, you need to understand the financial results, as well as the individual figures that are contained within them.

An analytical review of these results will highlight the significant variances and emerging trends in the following:

Sales
Gross profit
Overheads and costs
Operating profit
Debtors
Creditors
Cash utilisation

Time to innovate

Gathering data as a business has become easier thanks to the advent of increasingly powerful online cloud accounting platforms that use the cloud and automation to gather the latest data.

In the right hands, and with the advice of your trusted accountant, these systems can empower your business to learn incredible things and achieve proactive business strategies that work.

If you want to take your business to the next level, then you should consider entirely outsourcing your finance function to experts who have the knowledge and expertise to give you incredible insights.

Many of our clients are already turning to our outsourced finance director and management information service which enables them to benefit from this powerful information in a timely and cost-effective way.

Monthly or quarterly management information checklist

Step 1

Make sure all your financial information is up to date and recorded correctly in your accounting system.

Step 2

Reconcile and cross check your key accounting ledgers for accuracy and to allow you to resolve any discrepancies.

Step 3

Review the cut-off and timing differences within the accounts for items that will impact both the profit and loss and balance sheet.

Step 4

Undertake an analytical review of the management information including variances, fluctuations and unexpected items for accuracy and trends.

Step 5

Review your key performance indicators to highlight what management action is needed to change the numbers and improve your business’s profitability.

Step 6

Once you can regularly prepare this level of information, we work with you to understand what these numbers mean and help you identify what areas you need to improve and what actions you need to take.

This final step is the one most business owners don’t take but can most impact your business and personal wealth.