Why do you need Management Accounts?

Having spent the past 12 years within the Legal Industry, undertaking various roles from Finance Manager through to Managing Director, I made the decision to join Cashroom in April of this year to lead our professional services team.  

A question I am often asked is “why do I need Management Accounts?” and “how should the information be used?” 

In summary, Management Accounts provide an overview of your current and historical performance for the Financial Year, a comparison to budgets / forecasts and Key Performance Indicators (KPI’s). They would normally include a “Statement of Comprehensive Income” (stating the Profit or loss for period), “Statement of Financial Position” (Assets less Liabilities) and some choose to include Cashflows (to record historical and future inflows and outflows of cash). 

The information should be reviewed, ideally monthly, to measure profitability and to ensure that expenditure is under control. Typically, many Law firms focus solely on Income, without applying the mantra of “turnover is vanity, profit is sanity”! Or they are aware of the “profit” of the firm but do not consider how that profit margin can be improved. 

Without accurate, relevant, and timely information, decisions tend to be made without the financial information to hand. Decisions with regards to recruitment, salary reviews, suppliers etc. are likely to me made from a reactive standpoint rather than a proactive one! 

The question therefore to be asked is “how can Cashroom assist in improving my Financial Reporting?” 

Cashroom provides monthly Management Accounts to over 50 separate law firms in England and Wales, providing those same firms with an insight as to the firm’s performance and highlighting those areas for review. The Professional Services and Management Accounts Team can also provide relevant financial reporting and information from an “in house” point of view, while your external accountants are likely to produce things from an accounting or audit point of view (speaking as an Accountant myself!). With many of our services being offered on a fixed fee basis you can be assured that the expenditure being incurred can be measured against the output provided, which results in one less thing to worry about as a business owner. 

Should you wish to discuss any of the above in further detail then please contact my colleagues within the Business Development team, Alex Holt (alex.holt@thecashroom.co.uk) Or Daniel Jones (daniel.jones@thecashroom.co.uk) 

Adam Wilson