The consequences of Covid-19 are expected to leave business owners with potentially years of hardship and uncertainty. We are all aware of the impact the virus has had on almost every industry, but in terms of the agricultural sector we have seen volatile prices, supply chain disruption and labour concerns. With Brexit looming in the very near future, adding to the uncertainty, it is more important than ever to utilise your management accounts.
Here we have set out some simple, practical management accounting tips that can help mitigate the effect of these uncertain times on your business, along with some of the benefits to be gained:
Keeping records up to date
Timely book-keeping is the most crucial and, unfortunately, the most overlooked tip. Management reports are significantly more useful when they are up to date as they can provide more time to act upon the information abstracted. Additionally, processing numerous records in one session can be very time-consuming and stressful, at what is an already worrying time. As everything becomes increasingly digital, so too is book-keeping. There are a number of book-keeping systems available, both desktop and cloud based, which aid the record keeping and allow you to look at your management accounts at the click of a button.
Control your cash so it doesn’t control you
Cash is king. For almost any business, cashflow should be high on the priority list. Cash forecasts and budgets incorporate future income and expenditure allowing more informed decision making, and minimising the likelihood of unnecessary overspends.
Timely book-keeping allows VAT to be reclaimed at the earliest opportunity which aids cashflow. From a year-end tax perspective, having an idea of profit levels on a monthly or quarterly basis can allow greater benefit to be derived from capital allowances and pension contributions, as you are in a position to plan ahead and, where possible or necessary, purchase assets at the optimum time.
Improved financial performance and expansion
Effective management accounting can assist business owners in understanding their financial performance, and how this might be improved. Performance levels (e.g gross profit margin) in different enterprises can allow for optimal allocation of inputs, yielding the most profitable results. Having a reliable understanding of a business’ financial performance is also critical when considering expansion and/or diversification. It is important to assess levels of working capital available to fund the investment and to ensure there is no future shortfall.
If we can be of any assistance with regards management accounting and/or more efficient record keeping, please do not hesitate to contact us.
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