You probably need a Management Accountant if…
… Your revenue is growing but your profit is not.
When I first met Jenni, she had been in business for about 3 years. She offered a range of holistic services to her customers and her company was doing well. She was growing her customer base and sales had increased every year.
Taking me through her trading history, Jenni told me that she had made a small profit in her first year, which was something she was very proud of. In her second year she made even more profit and she felt she was well on the way to making her business a great success.
Everything she was doing was working, her customers were growing, she was beginning to make a name for herself, by the end of year 3 she was busier than ever. However, when Jenni looked at her year end accounts she was very surprised to see that while her revenue had doubled her profit had not. This did not seem right to her and she did not know what had happened.
So, what went wrong?
As you take on more and more business, it can be very hard to keep an eye on your spending. To keep your customers happy, you may spend more money in getting faster deliveries from your suppliers or, have spur of the moment purchases that eventually add up and eat into your profits.
The reality is that unless you track of your spending chances are that they will increase.
The good news is that this is a normal growth phase.
The bad news is that unless you get to grips with this, you will go out of business.
If you go back to when you started out, accounting was something that you did once a year. It was something that you had to do. Once you submitted your tax form you didn’t think about it again until the next year.
Not any more, accounting is now something that you need to bring your profit back in line with your revenue.
Monthly Management Accounting
This is where you do your bookkeeping every month and produce a profit and loss account, a balance sheet and check all the transactions in your bank (a bank reconciliation). This checks all the transactions you have during the month, puts them into categories and shows you what is working in your business and what is not.
Making good decisions.
Every day you are making decision after decision. Sometimes we look at what we did last month/year, sometimes we use our intuition other time we guess! Management Accounting provides you with a structured reporting system that you can use to help you make decisions. Which of your products or services are making money? which ones are losing money? What do you spend your money on each month? Where can you cut back?
Management Accounting looks at all of this and gives you the information that you can use to make informed decisions and take your business to the next level.
Planning for the future.
What we focus on grows and Management Accounting helps you plan and provides you with a road map of how to achieve your goals. Budgets and forecasts, help you put structure around what you want to achieve in next week, next month, next year.
By producing monthly accounts, if something is not working you find out about it immediately and can decide to correct it immediately.
All of this has a direct effect on your profit. To grow your profit, you need to manage it.
With practice this can become very straightforward, however, if you are doing it for the very first time you know I’d love to help you.
Contact me here to get a free 30-minute consultation where you can find out how Monthly Management Accounting can help your business