Introducing Management Accounting

So, you’ve now set up your client with 12 months forward budgets for income and variable cost by individual product to track gross margin for each. And beneath that, for fixed costs for the business and thus, net profit. 

You’ve revised the bookkeeping system to report on each. The first month went well and you are now ready to introduce management accounting…  

It’s a matter of using the chart of (management) accounts that you prepared for budgeting to now produce for month 2 the first set of accounts that compares actuals to budgeted amounts for each and expresses the +/- variance. You can get more sophisticated than that by introducing a Year to Date (YTD) column and even a Moving Annual Trend (MAT) or Moving Average column. But not first time out – best introduced in Q2 when your client has grasped the concept.

In the next post I’ll drill into the management accounts to see how to advise your client on what the numbers mean. So, you’re still in Consultancy mode for now.

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