Yesterday I held a workshop on how to upgrade your Management Accounts, so you can establish your leadership qualities and add value to the business.

Thanks to those who managed to attend – appreciate that its sometimes hard to fit these kinds of things into your workday, but I really enjoy the Q&A’s – its an extra challenge thinking on my feet!

 In the text below, I have summarised the 3 key areas of focus during this workshop.

1. Preparation

There is quite a bit of preparation that can be done that will directly improve the quality of the Management accounts almost immediately.

The goal here is to earn a level of trust from the wider business.

If the business trusts your numbers and trusts that work / output that the finance team delivers, then the business is more likely to read your reports and any analysis the finance team produces will be considered.

The first step is to ensure that your baseline is right.  Make sure that your Balance Sheet is as clean as a whistle.  You don’t want any skeletons lurking in there that will ultimately affect your P&L later.

Next is to ensure that the numbers are consistent.  A revenue recognition policy is in place and the same expenses go to the same account codes that are the same as the budget.

Finally, the KPIs.  Which KPIs should be included in the Management accounts?  A question that should be asked on quarterly or bi-annual basis. 

Are the business goals or OKRs represented here or are the same KPIs being shown every single month that most people in the business ignore?

2. Structure

After the baseline and data has been prepared, the next step is to ensure that the structure of the reports are right.

Worst case scenario is a P&L and Balance Sheet only, with the default structure from the General Ledger Software. 

For example, in Xero – if there is no manipulation your P&L report will look something like this:

Revenue item 1

Revenue item 2

Interest Income

TOTAL REVENUE

Direct costs

GROSS PROFIT

Accounting fees

Advertising & Marketing

Bank fees

Depreciation

Employee Social costs

Entertainment costs

Legal fees

Other Professional fees

Other staff costs

Pension

Printing & Stationery

Realised FX

Recruitment fees

Rent

Salaries

Subscription costs

Tech costs

Telephone costs

Travel costs

Unrealised FX

Utilities

NET PROFIT / LOSS

Are you able to tell what’s going on in the business with a P&L that looks like this?  No, me neither. 

There needs to be a real consideration of how the business is sold to Investors / the Board / Commercial relationships, etc and the P&L needs to reflect this narrative.

A cashflow report is also important, particularly if working with a fast growth or start-up business where cashflow can be tight. 

Outside Row headings, there are column headings that also need to be consistent and considered.  Comparing actual figures to budgets, prior months, prior years and year to date can really tell a lot about performance.  Currency and percentages.

Finally, software.  Is excel still the best way to do a consolidation?  Or should a few different software options be tested out (most have a 7 or 14 day trial period) to see what works for you and your business?

3. Adding Value

Last part is adding value – which can’t really be looked at until all the above has been completed first.

When preparing the Management Accounts Presentation – it needs to be treated like any other presentation. 

What are the top 3 takeaways that you want your reader to remember.  And if we’re really honest, what is the 1 key point you want people to take away from your presentation?

Once you have this, then you can create the presentation around this narrative.  Whether it be through charts or your commentary or both.  What analysis can you add to the standard 3 financial statements?

Speaking of commentary – are you adding more than just stating facts?  Does your commentary say something like, “Revenue is 5% below budget.” Full stop.  Nothing else?  If so – then maybe, consider adding colour to the numbers. 

The commentary should be what the numbers aren’t.  Essentially you want to say something that a reader can’t work out by looking at the numbers alone. 

A reader can definitely work out that Revenue is 5% below budget, but what they can’t read from the P&L is that the Revenue is 5% below budget BECAUSE a competitor dropped their prices to a crazy low amount for a few days and pulled away a lot of business temporarily.

We then touched on Reporting templates in the Q&A and thanks to one attendee, I’ve added an additional template to the Upgrade your Management Accounts course.

If you need support and mentoring to improve your Finance Leadership skills, here are four ways I can help...

Links:

1. Get your FREE Guide: Stepping into the role of Finance Director or CFO
2. Follow me and let me know what challenges you are having right now.
3. Register for the mini-course, Upgrade your Management Accounts and get noticed by the business 
4. Work with me in the new / aspiring FD course and includes Q&A sessions where we can discuss all of your questions and how to apply your learnings to your current role.