What Are Management Accounts for Hong Kong SMEs?

Management accounts are financial reports that track various financial figures and metrics, and provide insight into the current financial ... 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CONTACTUSByFastLaneTeam,September30,2020(10mins)Home»Blog»WhatAreManagementAccountsforHongKongSMEs?Tosuccessfullygrowabusiness,onemustbeabletomonitortheirmoneyandmeasuretheirperformancethroughouttheyear.Managementaccountsareanincrediblyusefultoolforthis,astheyhelpidentifytrends,planforgrowth,andcanalsoprovideinsightsthatcanassistindecisionmaking.Inthisarticle,welooktoexplainwhatmanagementaccountsare,whytheyareused,whattheyarecomposedof,andwhenyoutypicallyneedthem.   WhatYouWillLearn 1.Whataremanagementaccounts 2.Whytheyareused 3.Whatisincludedinamanagementaccount? 4.Whendoyouneedmanagementaccounts? 5.Templates 6.EnhancingYourCloudAccountingWithFastLane 1.WhatareManagementAccounts? Managementaccountsarefinancialreportsthattrackvariousfinancialfiguresandmetrics,andprovideinsightintothecurrentfinancialhealthofabusiness.Theseaccountsareusedbybusinessownersandmanagementfortheirday-to-day,andlong-termstrategicdecisionmakingandareoftenpreparedroutinelyonamonthlyorquarterlybasis. 2.WhyareManagementAccountsUsed? Asmentionedabove,managementaccountsareusedforday-todayorlong-termstrategicdecisionmaking.Tobemorespecific,theyareoftenusedforthepurposesof:   HelpingGrowaBusiness Togrowabusiness,oneneedsqualityandup-to-dateinformation.   BetterControlCashFlows Managementaccountsprovidethelatestcashflowinformationforbusinessownerstoquicklyidentifytrendsinrevenueandcosts.Thiscanhelpabusinessavoidanyidentifiedcrisissituationsthatcanbepotentiallycostly.   ToAssistWithTaxPlanning Accountantsoftenrelyonmanagementaccountswhenpredictingacompany’spotentialtaxliabilities Forinstance,inHongKong,taxrepresentativeswilloftenutilizemanagementaccountstodeterminewhetherHongKongtaxauthoritieshaveaccuratelycalculatedacompany’sprofitstaxliabilities   ImprovetheAuditProcess Auditorswilloftenrequestfordocumentationthatcansupportacompany’sfinancialstatementsandwillfrequentlyrefertomanagementaccounts Properlymaintainingmanagementaccountsinaroutinemannercanhelpidentifyaccountingissuesastheyarise,allowingbusinessestoactpromptly,ratherthantryingtocorrectallerrorsastheyareidentifiedduringanaudit   3.WhatisIncludedinaManagementAccount? Managementaccountstypicallyoutlineabusiness’:    CashPosition Cashflowstatementswilltracktheinflowandoutflowofcashforabusinessandareusuallyamendedonamonthlybasis.Forexample,itwilloutlinethecashreceivedforamonthascomparedtothepriormonth,theamountspent,anychangestothebusiness’cashreserveandtheclosingbankbalance.   Managementaccountscanhelpabusinessownergetfirmcontrolovertheircashflow,andenablesthemtomanagetheirbusinessfinancesmoreeffectively.Theinformationprovidedcanhelpidentifytrendsandsituationswherecashoutflowcanbeminimized.   ProfitandLoss Profitandlossrelatestohowincomeandexpensesflowsinandoutofabusiness.Understandingabusiness’profitandlossisessentialtopredictingtheactualbusinessperformanceofacompany.    BalanceSheet Balancesheetsisafinancialstatementthatlistsoutabusiness’sassets,liabilitiesandequities.Theyareusedtohelpprovideclarityonthefinancialstandingofafirm.   Often,newbusinessownerswillbeunfamiliarwithmanyaccountingconceptsandprinciples.Cloud-accountingsolutionssuchasXerooffertheiruserstemplatestohelpcreatevariousmanagementaccounts,includingbalancesheets.   ExecutiveSummary Executivesummariesarecomposedofimportanthighlights.Forinstance,theprofitmargins,turnoverratioorexpensesareoftenhighlightedinanexecutivesummary.Inaddition,executivesummariescanoftenhighlighttheperformanceofdifferentareasofabusiness,allowingbusinessownerstocompareandcontrasthowwelloneparticularareaoftheirbusinessisdoingascomparedtoothers.Thisshouldmakeiteasytoidentifywhichaspectsofabusinessaresucceeding,andwhichareunderperforming.    KeyPerformanceIndicators(“KPI”) KPIsareindustryandbusinessspecificindicatorsthatareusedtotrackhoweffectivelyacompanyisachievingtheirbusinessobjectives.KPIsareoftenusedtoevaluatetheirsuccessinreachingsetgoals.    ManycloudaccountingsolutionsoffertheabilitytopickandchoosewhatKPIsyouwanttracked.Bycombiningthisfunctionwiththeothervarioustoolsavailable,businessownersshouldhavevariousindicatorsavailabletothemtorevealwhethertheyareinlinewiththeirlongtermbusinessgoals. 4.WhenDoYouNeedIt? Managementaccountsshouldbeusedwheneverabusinessownerormanagementwantstobetterunderstandabusiness,orwhentheywanttorefertofactualinformationtoimprovetheirday-to-dayorlong-termdecisionmaking.   Managementaccountsarealsooftenusedbyexternalparties.Forinstance,auditorsortaxrepresentativeswillalsocommonlyrequestmanagementaccountsduringanaudit,orwhencalculatingthepotentialprofitstaxliabilities.Thesepartieswilloftenrequestthesedocumentstohelpdeterminewhetherabusiness’financialstatementsarecompletedinatrue,fairandcompletemannerortoconfirmtheprofitstaxliabilitiesoutlinedbylocaltaxauthorities.  5.Templates Often,newbusinessownerswillbeunfamiliarwithmanyaccountingconceptsandprinciples.Thiscancreatedifficultieswhendraftingmanagementaccounts.Cloud-accountingsolutionssuchasXerooffertheiruserstemplatestohelpcreatevariousmanagementaccounts,includingbalancesheetsandprofitsandlossstatements! EnhancingYourAccountingWithFastLane Togrowanddevelopabusiness,itisveryimportanttounderstandallaspectsofit.Managementaccountsandtheinformationtheyprovideareafantasticwayforbusinessownerstogainthisunderstanding.Forquestionsabouthowamanagementaccountcanhelpyourbusinessorhowtoaccessthemwithyourcloud-accountingsolution,pleasecontacttheFastLaneGroup! CONTACTUSRelatedArticlesAccounting&TaxationAccountingorBookkeeping?Whichofthemisneededformybusiness?Itmightbealittleconfusingforentrepreneursmaymistakeaccountingandbookkeepingasthesamething.Thisarticleistoshowyouhowyoushouldchoosebetweenaccountingandbookkeepingforyourbusiness.ByFastLaneTeam,March30,2022(15mins)Accounting&Taxation,Start-upsABeginner'sGuidetoBookkeepingBookkeepingisaveryimportantaspectofbusinessoperation.Inthisguide,wewillhaveabrieflookintosomebasicknowledgeonwhatisbookkeeping.ByFastLaneTeam,January3,2022(5mins)Accounting&Taxation,NewsFinalistsforXeroAwards2021AsXero’sPlatinumchampionpartner,wearedelightedtoannouncethatFastLaneGrouphasbeenselectedasoneofthefinalistsfortheHongKongPartneroftheYearforXeroAwardsAsia2021! ByFastLaneTeam,December9,2021(5mins)