Getting the business you need to have the life you want normally means having a profitable business, where you are in control and know what’s going on. Management accounts are a great tool to help you see when you need to take corrective action so that you can make the profit you want.
Here are four examples showing how valuable the investment in management accounts can be.
Making sure the price is right
On reviewing a clients monthly management accounts the gross profit margin was lower than expected. Drilling down into the detailed reports it was found that salesmen had been pricing jobs that delivered an average gross profit percentage of 20% not the target 38%, this cost the company £5,600 in one month. Prompt corrective action and training has now achieved the desired gross margin.
Paying over the top
Higher than expected material costs highlighted in a set of management accounts prompted an investigation into material prices. It was found that the material invoice price checking procedure had not been followed as a result in a change of person in the invoice processing role. The company was able to clawback just over £11,000 over a three month period.
Getting back VAT not claimed in error
Our client had a welcome refund of £2,600 after a VAT error had been identified when preparing management accounts where the book-keeper had missed the VAT claim on the purchase of a new van.
Lower than expected margin leads to discussion about invoicing
As part of the management accounts process we meet with business owners to discuss the results. At our meeting with one client we discovered that they hadn’t had time to invoice nearly £100,000 of work done and kept putting it off, which impacted on profitability and cash flow. Seeing a need for support we helped our client with systems and procedures to ensure that this doesn’t reoccur.
The investment in management accounts helps you get to grips with your business, getting you closer to the profitable business you need to have the life you want.