Management Accounting
A comprehensive understanding of the business numbers is at the heart of a successful enterprise. Management Accounting is the process of taking the raw book keeping data of the business and turning it into useful information for driving the business forwards.
Management accounts and reports can be – and should be – in whatever format the business needs to make decisions. The purpose is to be able to analyse and understand business transactions at a detailed level. Are these costs fixed? Variable? What causes them to change? Can we control them? The purpose is to move beyond understanding whether the business has made a profit or a loss at a global level; which specific products made money? Which specific services make a loss? Which specific markets are we successful in?
The aim is to look backwards to understand the results of past decisions (was the project controlled correctly? What did it cost? Were the anticipated rewards achieved?) and, as far as possible, to look forward based on solid foundations (what will the cash position of the business be in six weeks, or six months’ time? What can we gain from selling in a different market? Predictions of the future can be mapped in a budget and measured against expectations, creating a feedback and learning opportunity. Understanding the past, measuring the present and predicting the future gives tremendous power to the management team.