You might receive your management accounts each month, glance through the figures and put them aside until something needs your attention. Or perhaps you only discuss them with your accountant once a quarter.
Either way, it’s worth asking whether your routine gives you enough time to act.
For most growing businesses, a monthly review is a sensible starting point, with checks on cash flow and other key figures between reviews. Quarterly reviews may be enough if your finances are stable.
Here’s how to decide what works for you.
Why review your management accounts monthly?
Reviewing your figures each month will help you spot any problems before they continue unchecked.
For example, your sales might be growing while your profit margin falls. A monthly review gives you the opportunity to investigate whether supplier prices, overtime or discounts are affecting your return.
You can then decide whether to adjust your pricing, change how you deliver the work or review your purchasing.
Look beyond sales and profit, too. Review your balance sheet, cash position and upcoming commitments, including money customers owe you, supplier bills, borrowing and tax payments.
When might quarterly reviews be enough?
Quarterly reviews are better suited to you if your business has predictable income, consistent costs and enough cash to meet its commitments.
You’ll also need to meet any reporting requirements agreed with lenders or investors.
But quarterly accounts shouldn’t mean leaving your finances untouched for three months.
It’s also worth reconsidering your routine when circumstances change. Taking on staff or winning a contract could create commitments that need closer attention.
What should you check between reviews?
You don’t need another full set of accounts every time you check your finances. Between reviews, a weekly check of a few figures should help you spot issues that need attention. Depending on your business, this might cover:
- Your cash position and expected receipts
- Customer invoices that are overdue
- Payments due to suppliers
- Sales or spending on projects
A cash flow forecast can help you assess whether your expected receipts will cover all your upcoming payments. If your cash flow is under pressure, you may need to review your position daily.
How soon after month end should you review your accounts?
If your management accounts arrive too late to inform your decisions, you risk acting without the information they should provide.
So, agree a timetable with whoever prepares your accounts, then book time to discuss them once they’re ready.
Keep your bookkeeping up to date and make sure all your income and costs are recorded in the periods they relate to. A missing invoice or a sale recorded in the wrong month can make your profit look higher or lower than it should.
How should you review your management accounts?
Each review should help you decide what to do next. Work through these steps:
- Identify what’s changed and why. Compare performance with your budget and consider whether the differences are temporary or likely to continue.
- Account for seasonality. Lower sales than last month might be expected if you’re entering a quieter period. Compare your results with the same month last year for context.
- Decide what needs to happen. You might need to review a contract’s profitability, follow up overdue invoices or revisit a recruitment plan.
- Assign actions and follow them up. Give each action an owner and a deadline. At your next review, check whether it happened and had the intended effect.
- Update your forecast. Where your expectations have changed, revise your financial forecast so your plans reflect what you’ve learned from trading.
Get more from your management accounts
At Sysum Howard Duggan, our team includes chartered accountants and sector specialists who can help you understand what your results mean for your business.
We bring together management accounting, forecasting and tax expertise, so you can discuss your performance and plans with advisers who understand how your business operates. If you need support with financial strategy, our fractional FD service gives you access to senior financial expertise without employing a full-time finance director.
To discuss a review routine built around your business and the decisions ahead, get in touch.