Archive for the ‘Management Accounts’ Category

Why do Small to Medium Enterprises (SME) need the services of a Management Accountant?

Monday, December 6th, 2010

Once an SME reaches a certain level of size & complexity, using the services of a management accountant brings real & tangible benefits to the business.

Size in this instance will mean a turnover of one to two million euro per annum, with a staff of more than five people.
Complexity has many facets to it. The least complex business is one which sells a service for cash. The most complex SME business is one that manufactures & exports. Most SME business fall somewhere in between. The greater the complexity, the greater the need for quality information on which to base decisions.
That is where the services of a management accountant come in. Management Accountants are accountants who specialise in the internal information requirements of a business.
The main type of information provided on an ongoing basis is monthly management accounts. Management accounts provide timely information about the profitability of the business as a whole & about the profitability of significant elements of the business e.g. different branches, or different product lines. In many businesses loss making segments are covered up by profit making segments.
When an SME owner manager tells me his business is short of funds, I focus in on the area of working capital management. Working Capital consists of the funds the business has decided to invest in Stocks, Work in Progress & Debtors, less the short term funding provided by Trade Creditors.
If the owner does not keep his investment in Stocks, Work in progress and Debtors to an amount appropriate to the level of sales being generated, the business is liable to run into cash flow difficulties.
Monthly management accounts serve to keep constant focus on these key issues.
Larger SME’s have sufficient work to justify the cost of a full time management accountant employed directly by the company. Small & midsize SME’s can reap all of the benefits by availing of a quality outsourced management accounting service tailored to the individual needs of their business. This service is available at a fraction of the cost of hiring a fulltime management accountant.

Once an SME reaches a certain level of size & complexity, using the services of a management accountant brings real & tangible benefits to the business.

Size in this instance will mean a turnover of one to two million euro per annum, with a staff of more than five people.

Complexity has many facets to it. The least complex business is one which sells a service for cash. The most complex SME business is one that manufactures & exports. Most SME business fall somewhere in between. The greater the complexity, the greater the need for quality information on which to base decisions.

That is where the services of a management accountant come in. Management Accountants are accountants who specialise in the internal information requirements of a business.

The main type of information provided on an ongoing basis is monthly management accounts. Management accounts provide timely information about the profitability of the business as a whole & about the profitability of significant elements of the business e.g. different branches, or different product lines. In many businesses loss making segments are covered up by profit making segments.

When an SME owner manager tells me his business is short of funds, I focus in on the area of working capital management. Working Capital consists of the funds the business has decided to invest in Stocks, Work in Progress & Debtors, less the short term funding provided by Trade Creditors.

If the owner does not keep his investment in Stocks, Work in progress and Debtors to an amount appropriate to the level of sales being generated, the business is liable to run into cash flow difficulties.

Management Accounts I

Monthly management accounts serve to keep constant focus on these key issues.

Larger SME’s have sufficient work to justify the cost of a full time management accountant employed directly by the company. Small & midsize SME’s can reap all of the benefits by availing of a quality outsourced management accounting service tailored to the individual needs of their business. This service is available at a fraction of the cost of hiring a fulltime management accountant.