Management accounts: the five numbers worth reading every month
A 30-page pack nobody reads helps no one. Five figures, set against budget and last year, tell most owners what they need to know.
Management accounts are for decisions. The test of a good monthly pack is whether you can read it in ten minutes and know what to do next. For most owner-managed businesses, five numbers carry the story.
- Sales: this month, year to date, against budget and last year.
- Gross margin: what is left after the direct cost of each sale, as a percentage.
- Overheads: the fixed costs, with anything unusual explained.
- Net profit: the result, and the tax building up on it.
- Cash and debtor days: how much is in the bank, and how long customers take to pay.
A summer price freeze while costs rose: the margin fell for four months before prices were reviewed.
Show the data
| Jan | 41% |
|---|---|
| Feb | 42% |
| Mar | 40% |
| Apr | 39% |
| May | 41% |
| Jun | 38% |
| Jul | 36% |
| Aug | 37% |
| Sep | 35% |
| Oct | 38% |
| Nov | 40% |
| Dec | 41% |
Read the trend, not the month
One bad month can be timing. Three in a row is a pattern. Show each number as a line over twelve months and the story tells itself, as above, where margin slipped for a whole season before anyone acted.
Add one or two figures specific to your trade, such as utilisation in a professional firm, covers and spend per head in a restaurant, or stock turn in retail, and stop there.
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This insight is general information, not advice for your circumstances. Talk to us before acting on it.