Why annual accounts are your enemy
If a business has existed for a few years and it has grown steadily to the point where you have staff who need guiding and managing, then you are potentially missing a trick in not using your accounts information is a key tool in managing your business. Too many people look at the bank balance or the outstanding debtor report as their guides. This is very poor practice.
One has to recognise that running a successful business is a long -term process. There are few easy solutions. It is all about getting your team aligned with your objectives so that they help you identify opportunities and problems in short time so that you can do something about these matters. It needs doing over the long term.
If you organise your business in a way that enables you to look at your numbers each month you will achieve major benefits. If you want to improve something over the long term it is better if you measure what is going on against some yardstick. The financial data in your business is the seam of gold if you want to mine it.
You can organise your accounts to tell you profits on products or services or customers, whatever matters to you. You can see problems arise in good time. You can use the numbers to give people financial targets. You can build business plans to support financing applications. You can implement forecasting as the primary management tool in the business. If you are in a business with large projects that consume resources over time, forecasting is almost essential in ensuring you have the funds to complete them.
In taking your business forward, annual accounts are just like raking up old leaves, a complete waste of time for a growing or recovering business. The only beneficiary of annual accounts is HMRC and lenders (who actually prefer more up to date information).
If you want to escape this trap, give us a call to find out more.