Understanding accounts as a business manager
Understanding accounts as a business manager can be a big task to take on. Every company has different needs and they will vary depending on its size, type, and sector. As a business manager it can sometimes become your responsibility to make sure that the business keeps accurate records on all their accounts.
There are generally two different types of accounting information that you will want to keep track of:
- Financial accounts
- Management accounts
Financial accounts will describe the performance of your business; how much product you have sold and how much you have made selling your product. The financial performance of a business will have to be filed with Companies House every year. Management accounts are designed to help businesses plan and make decisions about key areas; sales, stocks, etc. With proper management accounting your business will run more effectively which is what every business strives for.
As a business manager one of your jobs may be to keep track of the financial accounts of the business. This will usually include a historical record of the company's past performance over a period of time; generally one year; this is usually done for shareholders, employees, suppliers, bankers, and tax purposes. Public companies will usually communicate their accounts to shareholders in an annual report which as a business manager you are responsible for. The report will also contain an overview of the management accounts. Your report should include but may not be limited to the following:
- Profits and Losses. This measures how much the company has made and how much it has lost; comparing the two. It should also compare the amount of income made against the cost of goods and services and other expenses during the past year.
- Balance Sheet. This part of the report gives the shareholders and others who have access to it a snapshot of the business assets and liabilities.
- Cash flow statement. This will show how the company has generated cash and disposed of it as well as liquid funds during the review period.
One of the other areas the business manager may be in charge of handling is the management accounts, which can help the company make some meaningful management decisions. Some of those areas may include:
- The process of sales. This may include decisions on pricing, how items are distributed and possible debtors.
- Purchasing. This can include purchasing stock records and creditors
- Believe it or not, there is no actual or legal way to prepare management accounts but without them it is difficult to run an effective business. The most important part about management accounts is being able to measure performance.
Benefits of using management accounts
Management accounts can enable your company to do many things. It can help you compare your accounts with original forecasts, manage your resources, and identify business trends. You can use management accounts for record keeping, planning and control, and also in decision making
So why is it so important as a business manager to understand accounts? Well, if you want to keep your company running effectively then learning how to manage accounts is extremely important. At the end of every year employees and most importantly upper management, owners and shareholders want to see how the company is doing. And while finances seem to be the top priority with any business, management accounts can keep those finances in working order so both become enablers to a successful company. Understanding accounts as a business manager can make the difference between staying in business or going out of it.
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