How is your business doing? You probably have a good feel for whether things are going well or badly; if you are busy or things have a bit slow, but how much do you really know about the financial stability of your business?
How often are you flat out, business should be great, but there's never any money?
Having accurate, up-to-date management information isn't just something you should have if and when the bank ask for it, it should be a vital tool you use in to control and protect your business and its finances.
Knowing who owes how money, how much and when it is due allows you spot potential problems, take action early and minimise the risk of bad debts or continuing to supply goods or services when you haven't been paid for those you have already supplied. Make sure your biggest and “best” customer isn't only your biggest because they keep ordering goods they never pay for!
Combine this with knowledge of who, what and when you owe to your suppliers, including VAT, PAYE & Corporation Tax, and you can start to manage your cash flow more effectively putting funds aside to cover amounts that will be falling due or organising finance in advance if necessary.
And whilst cash flow management is one of the most obvious and important uses of your management information it certainly isn't the only critic aspect.
Good quality information will allow you monitor your business performance;
Are you maintaining your margins? Rising turnover looks great but if it being bought on the back of falling margins you may well be giving away all your profits to your customers.
Are you hitting your targets? If you are hitting them easily, ask yourself if they are challenging enough, should they be set higher to help you grow your business. If you are missing your targets ask yourself why, are they unrealistic or you simply not taking the right actions? The sooner you can spot the problem the sooner you can take action to put it right.
This information can be gathered using the right accounting package; Xero, Quickbooks, Sage and Kashfow are just four of the different ones you can use to easily maintain and access this information but if you dig a bit deeper there is far more information you can glean.
How much are you investing in marketing? Where are you spending it? And most important, what return are you getting on it? Do you know where your new business is coming from? What marketing is working and what isn't producing a return?
Up-to-date, high quality management information allows you make informed decisions to grow and protect your business.