The Benefits of Outsourced Management Accounting Services for SME Owners
When most people think about accounting, financial accounting (that produces the three main financial statements) and tax accounting (that has to do with filing your SARS returns) are the first things that come to mind.
We’d like to dive a little deeper into another branch of accounting that every small business enterprise can benefit hugely from when it comes to running operations with precision: management accounting.
Let’s take a look at the management accounting process, what it quantifies, and how it can benefit your business strategy and bottom line.
What management accounting is – and isn’t
Unlike financial and tax accounting that produce financial statements for external review – for example, when presented to investors or the tax authorities; management accounting is designed for the eyes of company owners and managers.
Management accounts present crucial Insights into your operations and the financial health of the business. Here are some of the management accounting reports that you can expect from an outsourced financial management solution such as ours:
- Executive & Cash summary: this outlines the company’s profitability, income, and general performance, along with an overview of its financial information. It also states the amount and sources of business income, allowing patterns to be identified.
- Profit/Loss statement. This states the company’s overall profit or loss relative to previous periods. A constant net profit that increases over time should be the overall goal, but businesses affected by seasonal trends may see fluctuations in their profits at certain times.
- Balance Sheet: this provides an overview of the financial position of your business. The data can provide insights into your liabilities and how much income your assets are producing.
- Aged receivables and payables: analysing this statement will let you see how much you’re owed – and how many accounts are overdue – as well as how many of your own debts are being serviced on time.
The benefits of management accounting
Requesting management accounting reports from your outsourced accounting solution provider can produce the following benefits:
- Lower expenses – reports highlight costs and expenses, guiding you to adjust expenses appropriately
- An accurate and realistic budget – analyse cash flow and rethink your budget
- Larger profits – spot trends in the data and refocus business on proven money earners
- Precision future planning – make informed decisions for the future.