Well, yes! Ok, so as accountants maybe we’re a teeny bit biased but we’re prepared to back up this answer with some good, solid reasons that will give you plenty of food for thought. The first of which is this: to become a management accountant and produce a set of accurate and useful management accounts that actively seek ways to boost profit, you need qualifications backed up by hands-on experience. So, your management accountant will know the theory, rules and regulations, and be able to put it all into practice in a way that best suits your business because he or she has plenty of real world experience doing exactly that.
Forecasting and planning
A good team is a must, even if it’s a small team. The term ‘sole trader’, implies you’re going it alone in the world of business. That doesn’t have to be the case. You don’t have to face every single aspect of running your business alone. A sole trader or small business owner has enough to think about just starting up a business and getting beyond year one. Good bookkeeping will help get you to the end of the first year but a set of management accounts will help you forecast the future and plan for it. How’s your cash flow looking? How much tax will you have to pay and when? Are there any ways in which you could be more tax efficient?
The balance between cutting costs and investing
This is a tough balancing act and one that management accounts can help you achieve. Every business needs to keep a close eye on costs and identify ways in which savings can be made. But the flip side of the coin is failing to invest in areas that can boost your operational performance. The truth, as is so often the case, lies in doing a bit of both. To make the right calls in both areas, you need information and insights on what affects cost, risk, and adding value in the present and long term. Management accounts provide both. A good management accountant will give you the data and insights you need to make informed decisions about your business.
Need a cash injection to help your business grow? Well, you’ll need to provide accurate, convincing information in a format that appeals to banks and investors. Both will be more amenable to investing in your business if they can see clear evidence that it has the potential to perform well with the finance you’re asking for. Management accounts can help with that. Let’s not forget interest rates. If you’re planning on securing finance through a bank, it will of course come with interest. Think of your personal mortgage. If you want access to more deals, offers and low interest rates, you need to present a compelling case as to why you should be eligible for them. The same goes for your business financing.
Strategic planning—how you turn a vision into reality
In a nutshell, this is identifying goals and objectives and taking systematic steps to achieve them. This kind of planning has a retrospective approach: you identify where you want to be and work back to your current position. Like running a race in reverse as you start at the finish and rewind to the start line. Management accounts give you the financial information you need to make a plan, and identify the activities you need to include in it. This data is created, analysed, and then translated into plain English that managers and business owners can use to make decisions.