Six months that brought the importance of Management Information to the fore.
Management information can cover a myriad of different reports and documents and can be varied depending upon your business activities and how sophisticated your records and software are. At the very least, and under normal business conditions, I think every business needs an information pack to include a profit and loss account and a cashflow review as a minimum requirement. As the world reeled from the impact of Covid-19, business owners have become more reliant on the quality of their management information to enable them to make better, more informed decisions. I advise my clients to include within their management packs a balance sheet and a detailed review of aged debtors and creditor balances as well as a review of trading performance vs budget. On the back of the information produced, businesses should then look to update a rolling cashflow forecast.
We are working with many businesses to produce 12-week cashflow forecasts. These are then reviewed against management information so that business owners can ensure they are on top of their cash in these challenging times. It has now been 6 months since the initial lock down with most businesses back up and running (if indeed they did close). One thing that almost all businesses have in common is a squeeze on working capital brought about by challenges such as business customers wanting longer to pay, and suppliers wanting to be paid even quicker!
The best way to manage this squeeze on working capital is to have all relevant information to hand on a timely basis. If you have all the cash facts to hand – who do I owe, who owes me, what orders do I have in, when will they be paid, how much cash is available now etc etc, you can make much better, more informed decisions. Cashflow information is key for business owners as it reflects the here, now and immediate future.
Cashflow forecasts can identify where / when you are going to run out of cash. If you cannot move payment dates around you may need to look for short term funding from your bank. Any lender needs historic management information as well as projected outturns so they can determine the level of finance available to you. Having regular management information gives banks and other lenders comfort that you are in control of your business and the finances of that business. A lack of management information can make a business look unprofessional or a potentially risky investment.
So how do we speed up the process of creating this management information?
For micro and smaller businesses, this can be made very easy using cloud accounting software. The software is accessible anywhere, anytime and is accessible by anyone you deem necessary to view it. This means you can work seamlessly with your accountant to get up to date real time information. The management reports built into the software can be combined into professional looking reports, and all this can be done with just a few clicks. Getting data in can be digitalised so that you can speed up the bookkeeping process.
For businesses using desktop accounting software such as Sage 50c, you can now very cleverly use technology to get supplier invoices and expenses into your system without typing anything. It also means you can go paperless. It is a great way to speed up the preparation of your management information. It will give you more time to then review the management information and therefore make more timely decisions. We can also write management reports for businesses which extract data out of Sage 50c so that you can quickly report on key areas. We can even create dashboards to pull out key information as and when you need it.
For more information on what management information you should be preparing, how you can prepare it and the costs involved please contact Judith Dugdale, Corporate Services Director and Head of Digital Solutions or contact the Digital Solutions team.