Management accounts play a key role in helping trustees and management understand how a charity is performing financially throughout the year and support timely, informed decision‑making.
What are management accounts?
Management accounts are a reporting tool that provide up to date financial information. These are often produced on a monthly or quarterly basis depending on the management/trustee needs.
Format of management accounts
Unlike annual accounts, management accounts can be structured in any format that benefits the management team and the trustees. This can be from accounting software or using tools such as excel or Power BI.
A basic set of management accounts would include:
- Balance Sheet
- Income & Expenditure account
- Cashflow statement
- Commentary to explain any significant numbers.
Additional reports can be included for the benefit for decision makers such as:
- Fund specific income & expenditure
- Budget variance analysis
- Key Performance Indicators (KPI’s)
- Aged Payables/receivables.
Financial and non-financial metrics can be tracked in the management accounts to monitor what is important to the charity.
Why are management accounts important?
Preparing accurate management accounts on a regular basis provides those who make decisions an up-to-date picture of the charity’s financial position. Accounting adjustments are made during the management account process that would otherwise be left to the year-end accounts, to ensure the output shows an accurate position of the charity’s finances during the year.
Income and Expenditure can be monitored at both a high level and a detailed level. Fund budgets can be compared to actual movements during the year so any over/under spend can be investigated.
A cashflow forecast can identify any future cash surplus or deficit in advance.
All of these together aid the management/trustees in making better informed decisions, these could be around staffing decisions, purchases of fixed assets or commitments related to specific funds.
Next steps
Our VFO team provide outsourced management accounts along with our booking keeping services to many charities. Want to know more? Then please get in touch with the VFO team today to schedule a discovery call.
Please note that this content is not intended to give specific technical advice. It is designed to highlight some of the key changes rather than provide an exhaustive explanation of the topics. Professional advice should always be sought before action is either taken or refrained from as a result of information contained herein.
