When an organization does not have any structural management accounting, its owner does not have information about the profitability of the business. This can lead to cash flow gaps. The management accounting shows the financial condition of the company and helps develop sustainably.
Difficulties in Finance Management
In a small business, managers often make a mistake – they do not maintain full costing. Often, cost records are not maintained if:
Due to time constraints, many managers do not keep track of indicators properly. This leads to a lack of understanding of the organization’s financial condition. Small costs become large sums based on the results of the calculation. Without cost control, unnecessary expenses and cash gaps occur.
Management accounting provides information guidance on the financial status of the firm. The accounting transparency makes it possible to effectively manage the company.
Importance of Goods and Products Accounting
The lack of accounting for goods leads to uncertainty about the quantity of stocks in warehouses and profitability. Slow goods can accumulate, uncontrolled deviations from the unit cost norm can occur. The accounting program details the unit cost of goods, taking into account extra charges, discounts, additional delivery costs. In this way, you can plan financing and sales for the future.
An example of management accounting building
A business owner from the United States contacted us. The organization pays taxes on income. Trade turnover started growing rapidly. The owner did not have time to take into account goods and costs, he lost control over the business profitability.
What happened at the time of contacting us:
Income statement. Set up by groups and cost-based analytics:
Сomparison table of the work done:
|What was at the time of contacting us||Solution|
|Product cost||Lack of understanding||Accounting for each unit of goods. Understanding of list cost, profit, profitability.|
|Discounts, promotions for goods||Not taken into account||Taken into account|
|Returns of goods||Not taken into account||Each return unit is reflected|
|Inventory control||Not maintained||Accounting of goods in the context of warehouses|
|Bank payments||Different accounts, there was no generalization||Generalized detailed report on bank accounts|
|Trading platforms||Accounting for sales in different systems of sales platforms. Wholesale invoicing||Consolidated statement on all sales|
|Reportable person||Monthly cost reports from the reportable person||Costs are visible in the general cost table|
|Profit||Lack of understanding||Profit statement with itemized cost accounting|
We systematized the accounting. Thus, it was possible to reduce the burden on the business owner. Understanding of cash flows has appeared. We found out where we can save, profitability of products and goods. We created a clear accounting system and automated the process.
Management accounting provides insight into the profitability of a business, helps plan and eliminate cash gaps. Internal accounting guarantees control over financial flows of the company. Accounting automation minimizes the human factor, speeds up the information processing.
In order to build an internal accounting system, it is enough to have the Internet and input data. We will do the rest.