Management accounts bring all kinds of benefits to all kinds of businesses - and in particular, they bring clarity to the creative chaos that can be agency life! So, in this blog post, we’re going to focus on three of the most tangible benefits of management accounts for creative agencies.
If you’re still not entirely sure what management accounts are, they are monthly or quarterly financial statements that give you a clear overview of your business finances based on real-time data. You’ll find out more about management accounts here.
Benefit number one: producing monthly management accounts allows you to make better-informed business decisions. And better business decisions will, ultimately, lead to more success and higher profits for your agency.
Your decision making improves simply because you’re armed with accurate, real-time data - as opposed to data from your annual accounts which is often up to 18 months old.
Creative agency management accounts will usually include a profit and loss account (showing you precisely what money has entered or left the business in the last few weeks), so if you’re spending beyond your means, you’ll pick it up and act on it before it spirals out of control.
Similarly, you can identify which of your departments are ‘doing the business’ and which aren’t - which provides great insight for investing in new staff.
Better tax planning
If you’re only producing your accounts once a year to satisfy HMRC, your end-of-year tax calculation is very much a moment to keep your fingers crossed and hope for the best.
But with regular management accounts, you’ll know exactly how much money you’ve made each month, and therefore you’ll know how much tax you need to put aside.
By the time you owe the taxman his dues, you’ll have the money neatly saved up in a savings account, ready to hand over. No stress. No nasty surprises.
Better borrowing potential
One more perk of management accounts - a better relationship with your bank. And in any kind of business, that’s a great thing to have!
Whether you’re looking for a bigger overdraft facility, or hoping for a favourable answer to a loan application, it’s a big help if you can show up-to-date financial data based on recent results.
Of course, this is just the tip of the iceberg. There are many, many more advantages to creative agency management accounts too. If you’d like to know more, just get in touch with the Inform team.
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