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Are your management accounts fit for purpose?

14 August 2018

The 2018 Financial Handbook (effective from 1 September this year) requires all Trusts to produce monthly management accounts, and to share these accounts with the chair of Trustees. Management accounts also need to be shared with all Trustees at least six times a year. The requirement is proving unpopular, particularly with smaller trusts, who see it as a needless administrative burden.

Rather than resist the change, perhaps the new requirement should prompt a review of your Trust’s management accounts, to consider whether they’re effective, and if you can reduce the time spent producing them without compromising quality.

What do you need your management accounts to do?

Above all, management information should help the Trust’s key decision-makers to manage the activities of the trust in a financially sustainable way. So the management accounts need to summarise the financial performance and position for the year-to-date, to demonstrate the consequences of past decisions, whilst also looking ahead to help guide future decisions. The minimum content of management accounts is set out in the Financial Handbook (for further information, see our summary of changes), but you may want to include areas of particular concern to the Trust board as well.

The accounts need to do these things in a clear, concise, and targeted way. Virtually none of the people using them (trustees, CEOs and the like) will be financial specialists, so the information needs to be presented in a way that non-specialists can understand and use.

How can you produce management accounts as quickly and accurately as possible?

You might have established what the management accounts need to do, in terms of content and presentation. But if you can’t produce them quickly and accurately they’ll be less relevant, or worse, could lead to the Trustees making decisions based on incorrect or outdated information which harms the Trust.

To avoid these risks, you need a clear procedure for producing management accounts to reduce the risk of errors, and perhaps also a deadline to work towards to ensure they reach decision-makers whilst they’re still useful.

You might use reporting on your accounting package, and many systems can now be carefully tailored to produce reports which are 90% of the way towards your desired management account template. However, in most cases data will eventually make its way into a spreadsheet, at which point it is easily editable, but also more vulnerable to error. You will therefore need to build in a review process, to ensure the final report is reliable.

How can we help?

Your UHY team can assist you throughout the management accounts process, with services including:

  • Reviewing your current management accounts against the handbook requirements and suggesting enhancements
  • Assisting with the design of reports and templates, within your accounting package or through Microsoft Excel
  • Providing a monthly sense check of the report prior to distribution to the Trustees
  • Scrutinising the process of producing management accounts, to confirm the reliability of the data and identify efficiencies to generate them more quickly, perhaps as part of our internal audit program.

Finally, should you decide the process of designing and producing management accounts every month is too specialist, time consuming, or risky to be kept in-house, we also offer a complete management accounts service, ensuring your Trust board receive key management information each month which is timely, reliable, and user-friendly.

If you would like more information about this topic, contact me or your local UHY academy expert or visit our contact us page. 

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