April 10, 2024


How good are you at using your accounting software reports and do you use them to their full potential? This article will give you some tips and help you understand your figures better.

Good management reporting is a key discipline to maintain an informed and proactive business. If you can’t get your hands on a useful and timely report, you may find opportunities pass you by and unfavourable results become more likely.

All bookkeeping software has basic reporting features, but you need to know how to interpret these for them to matter. Here are some tips for you to apply to your management accounting approach:

What reports are good to review?

Aged Receivables and Aged Payable reports – Your software will be able to run a snapshot of everyone who owed you money and who you owed money to as at a specific date. Regularly chase up money you’re owed as it boosts cash which you can then use to pay off your suppliers.

Profit and loss – Look at your detailed profit or loss and investigate any abnormal balances. Does a certain cost look too high? It could be a duplicate in your records. Also, use the report to assess profit levels and consider your pricing. Remember – profit doesn’t equal cash! Consider a cash flow report if you’re making a lot of profit but never seem to have much money in the bank.

Balance sheet – Check out your loan balances and check interest is being recorded correctly. Also check that you haven’t got old balances that aren’t moving. It could be that a receipt or payment has accidentally been coded to a profit and loss category as an expense rather than to clear loan balances.

How can I make my reports meaningful?

Use relevant nominal codes - Each bookkeeping software has its own chart of accounts with default nominal codes. There’s always room to rename or add more. So, if you have multiple product lines and want to track their separate performances, why not stop coding to just “sales” and create new specific nominals. Or you could rename sales to rent received for example, if that would be more relevant to your business.

Just be careful not to create too many codes, otherwise it’ll be information overload and may cause confusion.

Good record keeping - Ever heard of “rubbish in, rubbish out”? If your record keeping is inconsistent, your reporting will be as well. You should check and review inputted data prior to finalisation of any management accounts. For instance, you may want to check the bank balance in your software agrees to your banking platform.

Always use comparatives - You’ve probably noticed that your year-end accounts always have the current year presented next to the previous year. This is so that the numbers can be compared to one another to help us interpret them. A top tip is to always have a comparative in your management accounts. Your bookkeeping software reports are generally customisable in this way.

Use variance analysis in % terms - Along with comparatives, expressing movements between periods, be it months or quarters, can help you understand whether income and expenses are up or down. Always do this in percentage (%) terms as a figure on its own will not tell the same story. For instance, if I told you sales were up by £10,000 you might think that’s good, until I told you turnover last period was £1,000,000. As a percentage that’s just a 0.01% increase.

Review management reports frequently - Depending on your business nature and size, the frequency of reporting will vary. However, I’d recommend at least once a quarter you review your financial reports in detail. It will allow you to stay agile and get on top of issues immediately. If you prepare VAT returns, it could become part of that quarterly process.

KPIs & Target Setting

One of the important ways to measure success is to have targets or key performance indicators (KPIs). These should be a mixture of quantitative and qualitative to give a well-rounded view of how your business is performing.

Good KPIs follow the SMART approach. Click here to find out more if you’ve not heard of this before. In short, your targets should be specific and achievable to motivate people.

Some KPIs you may wish to consider:

  • Staff happiness - do quarterly surveys to understand how your staff are feeling. This can help with employee retention.
  • Customer happiness - actively seek feedback from customer (Google reviews, Trip Advisor etc) and set targets/monitor the average rating review you get in a month. Great for understanding your customer wants and needs.
  • Working capital cycle - set a target for working capital. This is how many days you fund your aged receivables and inventory (stock) compared to how long it takes to pay off your suppliers.
  • Gearing - what is your debt-to-equity ratio? Have you got more loans than cash and retained earnings? Great to understand if you have bank loan covenants or wish to raise future finance.

Albert Goodman can offer help regarding your management reporting in several ways, including but not limited to cloud software support, large data processing and customising reports. Let me or your usual AG contact know if this could be of benefit to you, or even if you would like some help setting yourself some KPIs!


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