Management v Financial Accountants

Most business owners, when they think of accountants, fall asleep think about self assessment, year end, VAT returns and keeping HMRC and Companies House happy. These things all come under financial accountants.

You can’t be blamed for this – these are the things that have to be done when you have your own business. If you don’t file accounts and pay taxes, you enter a whole world of pain and therefore most people find themselves an accountant within the first year of setting up, as they recognise that doing this themselves isn’t much fun.

However, there is another species of accountant… a management accountant. I like to think we’re a bit more entertaining and we get to do the exciting stuff in businesses.

In general, financial accountants report externally – to HMRC, Companies House, investors, regulators - and they look at historical data, which they tend to aggregate into more concise forms.

Management accountants report internally within the business to the management, they look at and analyse historical data to a detailed level where appropriate and make forecasts. They create reports to guide decision-making within the business.

Now I’m not saying that financial accountants can’t do management accounting work – many of them can – but these are the differences in the focus of the roles.

Most small businesses have an accountant that focuses solely on the financial aspects and doesn’t really have much involvement in the day to day running of the business.

So what can you expect from a good management accountant?

Strategy & Business Drivers

They should work out what makes your business tick – for example, if you have a Physio clinic, you need to know that the number of new patients through the door each month is a key driver to knowing how busy you’re likely to be the following month (as patients have a block of treatment).

Planning & Budgeting

Linking these drivers to business goals and strategy plans allows plans and budgets to be made, and then performance reviewed against it.

Monthly Management Accounts & Cashflow Forecasts

Monthly management accounts are essential as the business grows – knowing how you’re doing, what your cashflow forecast looks like, what opportunities and challenges are on the horizon. When the inevitable surprises come along, if the business is well-organised, it can be adaptable and thrive, rather than flounder.

People & Systems

A management accountant should understand the management team and how it functions – different skills, different roles and responsibilities, how people interact with each other. Often, figures highlight an issue, and getting to the bottom of it invariably involves conversations about systems and people.

Normally, a gap in process has been identified, or someone has gone off the rails somewhere – a good management accountant should be able to help with resolving these issues, as we’re good with systems too. It also means that we can help with spotting opportunities for process improvement and automation.

Board Meeting Support

I also offer Board Meeting support – where I prepare the management accounts and analysis and join the board meetings (either monthly or quarterly) to act as a Fractional FD (part time Finance Director). This way, I can support timely decisions and challenges can be dealt with promptly, rather than too late, when nothing more can be done. Having accountability to an external person produces amazing results!

In short, management accountants tend to become your internal accounts department – keeping the business running smoothly in between the yearly reporting and VAT reporting requirements done by our financial accounting colleagues.

If you’d like a conversation about how we could help you to grow your business and remove the surprises and stress, get in touch here.