Everybody has heard of a management account, many of them may see a few of management accounts in the past. So, what is a management account? Management accounts are financial reports that track various financial figures and metrics, and provide insight into the current financial health of a business. In principle they are similar to Year End accounts but are less formal and are personalised to the user’s requirements.
Why is a Management Account Used?
Management Accounts are used for day-to-day or long-term strategic decision making.
Helping Grow a Business
To grow a business, it needs accurate, quality and up-to-date information.
Better Control Cash Flows
Management accounts provide the latest cash flow information for business owners to quickly identify trends in revenue and costs. This can help a business avoid any identified crisis situations that can be potentially costly.
To Assist with Tax Planning
Accountants often rely on management accounts when predicting a company’s potential tax liabilities. For instance, in Hong Kong, tax representatives will often utilize management accounts to determine whether Hong Kong tax authorities have accurately calculated a company’s profits tax liabilities.
Improve the Audit Process
Auditors will often request for documentation that can support a company’s financial statements and will frequently refer to management accounts. So, properly maintaining management accounts in a routine manner can help identify accounting issues as they arise. Also, allowing businesses to act promptly, rather than trying to correct all errors as they are identified during an audit. Thus, management accounts are the must for the audit checklist.
For further information, please contact us.
You may want to read: Checklist for Accounting and Auditing in Hong Kong