Why invest in better management information?

I am still surprised at the number of SME’s who don’t get accurate monthly management accounts within a couple of weeks of the month-end close. I recently heard of a medium size business who was preparing quarterly management accounts!

“But what does it matter if I don’t get the figures for six weeks?”  My response to this is that you won’t know how you performed in the first week of August until mid-September. Or in the case of the business above, November or December! This could be too late as you may have been already hit by spiraling costs, excess stocks or too many heads.

I can see that when profits are good and you have money in the bank there is less pressure to invest in better management information. But it can be likened to trying to manage a contract with no feedback on how it is going or if the employees are working efficiently (or at all!). Or indeed running a manufacturing plant without knowing how much you have produced and of what quality. In other words, blindfolded.

Knowing promptly how you are performing is essential as it allows you to make changes to improve the situation quickly. This especially has been seen recently where Covid-19 has meant businesses have needed to respond quickly and become more efficient to survive. Just imagine having to wait for 3 months until you know what impact it has had on your business in order to make changes!

Improving your management information is not difficult, it just needs focus to make the process efficient and fit for purpose. It’s the same as you would do in other areas of your business, you invest time to understand the shortcomings and then make the necessary improvements. A widely experienced specialist can bring different ideas to the table and help the Finance team deliver what the business needs.

In addition, management accounts provide a number of other benefits that include:

1.      Encouraging the Finance team to carry out Balance Sheet control reconciliations in a timely manner and thus improve the accuracy of the accounts (and reduce fraud risk).

2.      Monitoring how you are performing against budget for the month and year to date.

3.      Showing investors that you know what you are doing or are “investor-ready”.

4.      Offering an aid for tax and dividend planning.

5.      Lowering your annual audit fee as the accounts can be prepared more quickly and efficiently.

As we start to lift our heads above the parapet, now is the perfect time to invest in management information so we remain agile to both challenges and opportunities that arise over the coming months.

Having an experienced portfolio Finance Director can be a great way to enable the business to focus on what it needs from Finance and make it happen efficiently. A day or two a week can be a cost-effective (and agile!) way to add specialist support and up-skill the Finance team to give the business what it needs from its management information.

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