Having a clear picture of the financial health of your business is important for any owner. Management information is an umbrella term for data that relates to your business activity, but ultimately it covers anything which can help you to make informed decisions.
The past 18 months has shone a spotlight on the importance of financial information. When the data is high quality it allows a business to monitor its performance and identify any bumps in the road ahead.
What should your
management information include?
A lot of management information that
I see is backwards looking, for example, profit and loss statements and balance sheets. It is still fairly rare for businesses to include forecasting even after the impact of the pandemic where many businesses experienced a squeeze on their working capital. But that is where the value is.
Your management information works to present a snapshot of your
business’s financial health at one point in time. Forecasting goes one step further offering predictions around how your business will cope in the immediate future. This means you can identify if you may run out of money
and where in the business this will happen. If your forecast is showing gaps in your cashflow you may need
to access funding.
What does a lender
want to see?
It’s a real balancing act. The lender will need to see that the money is required but you also need to show that you are able to make the repayments.
It’s important to specify where the money will be spent e.g. redundancy payments or equipment purchase. It’s incredibly difficult to ask for money to pad out your working capital in general terms so your forecasting will be vital here to inform you where the money will be needed and also to give an indication of whether you can make the repayments.
Market trends can also be used to back up an application. Most applications will include some sort of basic commentary around this but currently they can be useful for sectors such as hospitality. For example, clubs will have shown a dramatic loss over the last 18 months but will be predicting a boom period once restrictions ease. The information that a lender requires will vary so
it’s important to seek advice if you’re unsure.
How is management
The best place to begin is to speak with your accountant and begin to review your processes. For some owners
implementing management information is a big job as they don’t have the
procedures already imbedded.
The overall aim is to make the information easily accessible to allow for relevant information in a timely manner. Cloud accounting software like Xero can help with this. These programmes can also add a level of sophistication to funding applications as the way the data is extracted will look professional and sophisticated even if the numbers themselves are fairly basic.
If you want to improve your management information to safeguard the future of your business, get in touch.