Many small businesses don’t worry about , they just wait until their accountant prepares the financial statements at the end of the year. This is fine if your business is just ticking over or you are running a lifestyle business. But if you are looking for growth you really need to understand how it’s performing and what’s coming up that needs your attention. The three main management accounting reports are:
Ideally you should review these three reports each month and look at how the numbers are changing, e.g. was the cash coming into the business last month less than the amount going out; has your stock level increased or decreased significantly; was the value of your sales significantly different from last month or the same month last year? Once you have identified major changes, it’s important to follow up to understand why the changes have occurred and to assess whether you need to take any actions.
A quick way to keep track of your business (and especially good for those of you who don’t like tables of numbers) is to review a dashboard each month. This is a series of charts that looks at the (KPIs) for your business. It’s really easy to see the trends and focus on any unusual results. KPIs may vary from business to business, but if you’re interested in using a standard version please download the KPI Dashboard.