How regularly do you receive accurate and up-to-date interim financial information about your business? Do you know how your business is currently performing? What are your goals over the next few years? These are all questions I like to ask business owners and prospective clients.
The value of accurate and timely management information (MI) is often underappreciated, and the benefits often misunderstood.
Regardless of where a business is in its life cycle, management information is vital to ensuring the aims and objectives of the business are met. From start-up businesses, which really benefit from detailed MI to help assess how a new venture is performing, to mature businesses whose owners are looking to maximise preservation of value during succession/exit planning. There is something to be gained for companies at any stage.
What are the main benefits of detailed MI?
- Monthly or quarterly updates on your financial position and performance means sharper and timelier decision making.
- Stakeholder/relationship management – key stakeholders such as lenders may have a healthier relationship with the business, resulting in better access to funding.
- Tax planning – key actions can be taken sooner, such as remuneration strategy and capex purchasing timing.
- Forecast what the statutory accounts might look like and plan cashflow for tax liabilities in advance.
- Provides metrics that key personnel/teams can be appraised on, for example performance against budget.
What does MI typically include?
- Key financials (profit and loss account, Balance Sheet and forecasts/scenario planning).
- Graphs and charts that bring the numbers to life and allow for visual representation of performance and trends, etc.
- Key Performance Indicators (KPIs) – both financial (such as units sold) and non-financial (such as the number of website clicks). KPIs help the users of the management information to understand why the figures (e.g. turnover) are what they are.
- Commentary which highlights key variances in the management information to give a better understanding for the users of the MI.
Use of technology in timely MI
In recent years, digital/cloud-based accountancy solutions are making the preparation of accurate and timely management information more accessible for businesses. Making the most of the systems and tools available gives you an edge in terms of really understanding your business finances and being able to make informed decisions (e.g. investment and financing decisions).
From banks being able to share transactional information in real time with your accounting software, to the automation of purchase ledger and tools to automate credit control functions – all this lends itself towards a finance function that is more conducive to allowing robust management information to be prepared.
If the timely MI isn’t enough of a win, there are also internal efficiencies to be gained. Most of these applications ‘live’ in an eco-system and are designed with integration in mind. This goes a long way to streamlining your internal processes and allowing you and your staff to focus their attention on other areas of the business.
Should you wish to discuss your business needs, we’d be happy to help. Please get in touch with your usual BHP contact or a member of our Digital Finance Team.
