Management Accounting - The what, the when and the why

Startups & SME AdviceTax AdviceAccountancy Best Practice

4 Apr

Management Accounting - The what, the when and the why

Benefits of Management Accounting for Startups and SMEs

Management accounting is a branch of accounting that is focused on providing information and analysis to management team within an organisation to help them make informed business decisions to achieve their strategic goals. Management accounting reports may include budgeting and forecasting, cost analysis, performance evaluation, and risk assessment of the business.

✔️ The what - Management accounting is the process of preparing and producing the financial reports for managers and business owners.

✔️ The when - Management accounts are usually prepared on a regular and consistent basis to ensure a business owner or management team are getting the most out of monitoring their efforts. There is no set rule for this but typically they're produced monthly, or quarterly.

✔️ The why - Most companies produce management accounts because they need to examine the financial health of the organisation. It helps managers strategize, course correct and make informed decisions based on the analysis and interpretation of the financial data related to the internal operations of the company. It is a virtual tool to help the managers of an organisation steer it towards their goals. Examples include Cash flow analysis, Constraint analysis, Break-even analysis, Product costing and valuation and the like.

Is there a legal requirement to prepare management accounts?

There is no legal requirement to prepare management accounts, but it is hard to run a business effectively without them. Since management accounting is not mandatory by any law, it can have its own structure according to the company's requirements. So, if the company feels certain areas need more in-depth analysis or investigation it can do so freely.

Difference between Financial Accounting and Management Accounting?

✔️ Target group: Financial accounting is of great importance to current and potential investors, creditors and others outside the organisation. Management accounting is necessary for managers i.e., people inside the organisation who direct and control its operations, to make current and future financial decisions for their business.

✔️ Period: Financial accounting focuses on history; reports on the prior quarter or year. Managerial accounting focuses on the present and forecasts for the future.

✔️ Focus: Financial accountant is tasked with a more structured, external focus carrying out accurate historical financial recording and reporting. Managerial accounting focuses on internal reporting and strategies and problem solving for profitability and long-term business success.

Benefits of Management Accounting for Startups and SMEs

Benefits of keeping management accounts

Future planning
By comparing your management accounts either monthly, quarterly or yearly you can look for patterns in income and cash flow. This leads to more accurate forecasts of future revenue or make allowances for doubtful accounts or even spot seasonal differences in cash flow.
Acquisition of funding
Management accounts can back up your business plan with comparable trends and forecasts. Investors can therefore be approached confidently. Sometimes, investors insist on management accounts before making crucial investment decisions.
Process optimisation
Understand your cash flow means you can make any needed improvements. For example, improving your collection process, or make other credit decisions quickly.

How can we support your business?

We at Dragon Argent, are happy to help with preparing management accounts for your business and provide any professional advice to help you make the best decision. We’ve seen the impact that it has made on the finances and performance of countless other tech businesses that we’ve worked with. We know that we can have the same impact on your business too.

Book a discovery call with one of our expert accountants in London today and find out how we can help you take your business to the next level.

Book a call with our Accountant today ↓

Author

Anitha Maheshwar

Accountancy Client Manager

Email - anitha.maheshwar@dragonargent.com

LinkedIn

Back to blogs

webinars FOR FOUNDERS

Featured

Dealing with Disciplinaries and Grievances

In this webinar, attendees will gain insights into the legal requirements and practical strategies and tips for managing disciplinary and grievance situations.

Your internal finance function: How to set up to enable business growth?

As business owners, you know that managing finances goes far beyond bookkeeping—it’s about setting up a strategic foundation that drives growth. In this webinar, we’ll explore how to structure your internal finance function to not only manage day-to-day financial operations but to empower your business to scale effectively.

Introduction to The Entrepreneurial Operating System (EOS)

As a founder, building and scaling a business can often feel like an overwhelming challenge. From managing growth to ensuring your team is aligned, every decision you make impacts your company’s long-term success. That’s where the Entrepreneurial Operating System® (EOS®) comes in.

Demystifying Intellectual Property: Copyright, Trademark & Design

Innovation and creativity spark conversations about intellectual property (IP), but it often leaves people confused. The good news? This interactive webinar cuts through the complexity, explaining key IP concepts, types, and why it matters.

An Introduction to Private Client Law: Webinar 2 – Lasting Powers of Attorney

There may be a time when you can no longer make or communicate your own decisions. Having a lasting power of attorney in place can save considerable time and costs if the worst should happen – so it's worth considering now. A power of attorney is a legal document that appoints someone – your 'attorney' – to make decisions on your behalf.

Protect your Business Intellectual Property: Copyright, Trademark & Design

From creations to brand names, this session equips you to identify and protect the intellectual goldmine within your business and how best to protect them. Take control of your IP, generate income and secure funding.

Recorded Webinar 1: An Introduction to Private Client Law: Navigating Wills, Trusts, Estate Planning, and Inheritance Tax

In an era marked by evolving legal landscapes and complex family dynamics, understanding the intricacies of estate planning has never been more crucial. Partner and Head of Private Client James McMullan at West End Solicitors, RIAA Barker Gillette UK, presents an insightful webinar on wills, trusts, estate planning and inheritance tax.

Join our panel discussion at The Business Show: How to protect and scale your business

Join the discussion and leave with a clear sense of funding rounds and the tax incentive landscape in the UK and how best to navigate it to aid commercial success.

Recorded Webinar: The Maternity Pledge and Maternity Leave

This webinar aims to address the challenges and hurdles women faces at the time of motherhood both personally and at workplace. We have also covered basic Maternity, Paternity and payment entitlements policies which sets out an employee’s basic contractual rights helping in creating a family friendly culture within the workplace.

Don't forget to share this post!

Blog Post

Anitha Maheshwar