Unlocking the Power of Financial Insights : Crisp Accountancy

Unlocking The Power Of Financial Insights Blog Image

One of the most rewarding parts of our work at Crisp Accountancy is delivering the first set of management accounts—what we like to call financial insights—to business owners who have either never received them before or have only had subpar versions in the past.

The reactions we get are always the same: "How did we ever manage without these?"

Just last week, I had the pleasure of witnessing this transformation firsthand with a couple of different clients. Here are some of their genuine responses:

“I really needed this in my life.”
“It’s actually a bit life-changing.”
“It’s really put some fire in my belly.”
“For the first time, the numbers actually make sense.”

This isn’t about us blowing our own trumpet, it's about highlighting what many small business owners are missing out on.

What Are “Management Accounts”?

One major hurdle in getting business owners to appreciate management accounts is a fundamental misunderstanding of what they are. The term often conjures up images of year-end statutory accounts, which isn't exactly exciting for most people.

At Crisp Accountancy, we prefer to call them financial insights. These are regular (usually monthly or quarterly) reports designed to facilitate informed decision-making. Unlike statutory accounts, management accounts are for internal use, giving us the freedom to tailor them to your needs without being bound by external accounting rules.

Why Are Small Business Owners Missing Out?

The lack of understanding is a key factor. You can’t value what you don’t understand, leading to underinvestment in finance functions. Small businesses often prioritise compliance (statutory accounts, VAT returns) over value-added reporting.

Traditionally, detailed month-end closings and management reporting were only feasible for big companies due to the effort and resources required. However, advancements in accounting technology now allow smaller teams to achieve similar results quickly and efficiently. Additionally, the rise of virtual outsourced finance teams means that even small businesses can now afford management reporting.

Alternatives to Management Accounts

Some owners rely on cash accounting, looking at their bank balance to make decisions. Others make decisions based on annual accounts prepared by their “once a year” accountant. A few might use unadjusted P&L reports from Xero. None of these alternatives suffice for informed decision-making.

The Risks of Operating Without Effective Management Reporting

Without proper financial insights, businesses face poor decision-making, cash flow challenges, missed growth opportunities, inability to adapt to market changes, and loss of financial control. Understanding your numbers is a competitive advantage for small business owners.

What Do Great Management Reports Look Like?

There’s no one-size-fits-all answer. Reports should be tailored to the business and management team. They should include lots of visuals, graphs, and charts, highlighting important numbers while providing detailed data for those who want it. Key components include expected reports like P&L, balance sheet, and cash flow, alongside KPIs relevant to the business.

Key Ingredients for Effective Management Accounts

Accurate Data: Ensure your bookkeeping and financial records are accurate. Use an expert—don’t DIY.
Bespoke Chart of Accounts (COA): Tailor your COA to your business’s reporting needs.
Period End Close with Adjustments: Create a robust period-end close process, ensuring data relevance for the period.
Speed: The quicker the reports, the better. Fresh data enables timely decisions.
Actionable Commentary: Most managers don’t have a deep understanding of numbers, so commentary is vital. We tell the story of your numbers in an understandable and actionable way.
Ever-evolving: Reports should evolve as the business changes.
Regular Review: Management accounts should be reviewed regularly as part of your business’s rhythm.

Conclusion

Effective management reporting is a game-changer for small business owners. By implementing tailored financial insights, you can make better-informed decisions, seize growth opportunities, and maintain financial control. Don’t miss out on the competitive advantage that comes with understanding your numbers—embrace the power of outstanding management accounts and drive your business to success.