Management Accounting Can Make You Richer

• Posted on Елена Пермякова
• in Blog
• on May 20, 2021
• Comments Off on Management Accounting Can Make You Richer

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:

• the company has revenue taxation system;
• the business owner has several organizations and does not have consolidated accounting.

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:

• production of goods, resale;
• 7 retail trade sites on the Internet and wholesales;
• two warehouses: main warehouse, warehouse in Amazon. Sale of goods with delivery directly from the supplier;
• goods were lost in the Amazon warehouse. The accounting was not synchronized with the warehouse;
• discounts and promotions were applied without including;
• payments by cards and through a payment system with a commission. The commission was not taken into account;
• there was no clear understanding of the product cost;
• reportable person;
• management accounting was kept in excel partially;
• there was no generalized accounting of income and expenses.

Provided solution:

• accounting of products and costs in the program;
• transparency of the price and cost of each unit of goods;
• automated loading of data from trading platforms into the accounting database;
• accounting of bank statements for all accounts;
• unit cost analysis schedule; Gross profit calculation. Profit statement with itemized cost analytics.

Income statement. Set up by groups and cost-based analytics:

Сomparison table of the work done:

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.

Conclusion

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.