Cable backs monthly management accounts

Monthly management accounts

Vince Cable clearly does not live in the real world. Business are struggling and he is suggesting monthly management accounts. Who produces these ?? The proprietor, a new member of staff, the external accountants ? Either way this is more cost / time spent on administration. If he wants to really help business, simplify tax by abolishing NIC and increasing income tax. This will not only remove the hassles of red tape but substantially cut the effectiveness of tax avoidance schemes. It will also give business a level playing field.

Jon Faux: Faux & Company

Posted by: jon faux BA, FCCA, 29 Nov 2010 | 11:24

Be informed - and act early

Of course businesses should measure performance - be that with the help of monthly management accounts or other indicators. Anyone arguing otherwise would have to be in a very sound financial position now to have any credibility. Those businesses which have consistently kept on top of performance monitoring should, on average, be far better placed now than those who have drifted along through the good times and now begrudge spending time and money on this issue.

Posted by: Jennifer Davies, www.revellward.co.uk, 29 Nov 2010 | 13:42

A very sensible idea

I disagree with John Faux. Monthly management accounts would give any bank or other external investor more comfort over the management team and their ability to control their own business. It really isn't that costly to keep decent accounting books and records and any company wanting its finances to be taken seriously would see producing monthly accounts as adding more value than just "cost / admin".

Posted by: Peter James, 29 Nov 2010 | 13:49

Agree with Jon

Monthly management accounts? for sole traders whose income is declining?

Nice work for the accountants but unless we are willing to put our letters and blood types on these accounts, the banks will still ignore them.

Posted by: Eleanor, 29 Nov 2010 | 13:56

Monthly Management Accounts

I agree with Mr. Faux - Mr. Cable needs to separate himself a little from the rest of today's government and float (preferably crash! - without injury) gently back to earth and join the rest of us living in the real world. It is already hard enough for the majority of SME's who do not have the luxury of being able to afford a bookkeeper or regular outsourced accountant or other profesional. Those that have in-house skills are stuggling still as it is Mr. Cable so how on earth does he expect todays small business which has to be leaner than ever in terms of headcount to pay for all this extra advice, much less find the time to do it? It really is time to listen or offer sensible affordable solutions. The time for burying ones head in the sand and what seems to me like helping a friend develop their business for producing managment accounts is over.

Posted by: Ketan Suchak, 29 Nov 2010 | 15:04

A bad idea !

Given that HMRC will be insisting that all limited companies file full iXBRL accounts from next April. The UK Government will already have a readymade database of detailed financial information on all UK limited companies which could be made available to finance companies to aid small business funding.

If it’s good enough for the tax office it should be good enough for banks.

Posted by: Stephen Muncaster MBA ACA ACMA, 29 Nov 2010 | 15:16

Cable backs monthly management accounts

Small businesses need accurate and timely monthly mangement accounts...I wish it was law, and my business blog lists the key benefits:

http://www.accountantnow.co.uk/news/vince-cable-agrees-monthly-management-accounts-are-essential/

Vince Cable has mde the first step in 'raising the profile' of the argument. What are the political measures to bring about change in the marketplace?

Accountants must take responsibility in making sure their clients have and most importantly use this financial information in their business decisions.

Posted by: www.accountantnow.co.uk, 29 Nov 2010 | 17:38

Good idea

I'm sure there's a level of small business that would benefit, albeit not necessarily the very smallest. Practitioners who do small business accounts are over wedded to annual compliance rituals. There is software, eg QB, that does month by month columns at a click or two, and it's easy to adjust and rectify entries to provide meaningful monthlies.

Posted by: Ted Goater FCA, 29 Nov 2010 | 20:25

Management

The clue is in the title - these are monthly MANAGEMENT accounts - they are for the benefit of the (owner) manager. The annual accounts may be too late and in inappropriate detail. The transactions should be recorded for VAT purposes for all but the smallest businesses and doing it monthly, in a way that makes sense, simply means the owner can be on top of bad news (or celebrate the good news) sooner rather than later. Of course Management Information isn’t purely a P&L and Balance Sheet but it’s a start.

Posted by: Caroline Billington, 30 Nov 2010 | 09:39

iXBRL

It's iXBRL that needs stopping. It's completely over the top for most companies, adding further costs and complexities at the very worst time for most small companies.

http://www.icas.org.uk/site/cms/download/TAX/tax_subm_ctonlinefiling_cf_20090721.pdf

This affects every business in the UK. Only some businesses need management accounts - generally when the complexity of their operations outstrips the boss's ability to keep it all in his head. And most of them are smart enough to recognize that. They don't need some Ivory Towered politician to tell them.

Posted by: Nicolas Merlinski, 30 Nov 2010 | 10:15

It's not rocket science

I agree with a number of the sentiments above. The key message for small business owner/managers from me as an accountant and trainer is that finance and accounting doesn't need to be a mystery; with focussed, short and importantly value for money training, business owners can easily be put back in control of their financial stories, without huge cost. When so much in the economy is out of your control, take control of the one thing that really matters - your own finances.

Posted by: Robin Pagden, 30 Nov 2010 | 12:57

Meaningful management information

I am surprised by the first comment above. Decision making needs timely and relevant information. Audit practices are necessarily focussed on annual statutory accounts but the information to run your business needs to be meaningful to you. Knowing what your key business drivers are and the frequency that you need to monitor them is a key factor of good management. And why shouldn't smes have good management. I am delighted that Vince Cable has drawn attention to the importance of regular management information ( yes it may not always be P&L, BS and cashflow. What the management need to best manage their business should also be seen by the credit industry as relevant to their lending criteria.

Posted by: Richard Brooks, 01 Dec 2010 | 09:43

Management Accounts

Ha I am very surprise about the first comment? who gave him the fellowship? In my experience heading the finance devision we must communicate company info ASAP to management. Monthly Management accounts are vital to take necessary step to control company direction. It will give good picture about sales trend, Expenditure & profitability of the business. Together with a note to the accounts explaining all the significant figures & trends will ultimately can save SME businesses!!!

Posted by: Dushan, 03 Dec 2010 | 17:47

Management Accounts

Regular Management Accounts for all sizes of Businesses is a very wise idea. If the Business s VAT registered they have to perform the book keeping activity on a regular basis. Therefore if all the basic entries are entered into a suitable book keeping System, it is not difficult or too costly to produce regular Profit & Loss Accounts. This will be a planning tool for all businesses.

Posted by: Thiru Vasagam FCMA ACA, 10 Jan 2011 | 10:20