Manufacturing management accounts are a must
Why are manufacturing management accounts a must? Well, despite the uncertainty that Brexit has caused, there has been no shortage in recent weeks of news about manufacturing firms in the Midlands investing in growth, or about the strength of manufacturing in our region. This included a variety of Midlands businesses appearing in the Sunday Times HSBC Top Track 100 – such as food manufacturer 2 Sisters and Staffordshire excavator manufacturer JCB – as well as the announcement from Jaguar Land Rover (JLR) about its plans to create 250 new jobs through the launch of its new technical centre near Coventry.
So with the sector faring well, businesses in this industry should really be operating with full and regular manufacturing management accounts. This is particularly because the nature of manufacturing can often mean firms in the sector are more likely to be exporting their goods, or more prone to risks from ever-changing global or local markets.
Research has highlighted that only around half of businesses enjoy the benefits of management accounts, with many seeing them as an additional unnecessary cost, focusing instead on historic accounting data and statutory accounting duties.
However, to be truly adaptable in business, a forward-looking approach is needed to be able to drive performance now and in the future. Business is not always about survival of the fittest but survival of those who monitor, plan and adapt accordingly. It is only through the monitoring and planning that the correct adaptations can be implemented.
Manufacturing management accounts aren’t just for large businesses either. Whilst it is often the case that it is the larger organisations that invest in such activities, smaller businesses can benefit significantly. It most cases it will help them to grow. Being able to analyse financial data alongside other important factors to consider such as market forces, and make forecasts based on these, can enable a business to plan early to make funds available to capitalise on potential opportunities, whether these be seasonal or general opportunities that may benefit the business.
Gaining internal stakeholder or investor buy-in would be areas that would really be helped by having management accounts prepared and in place. In addition, keeping the business on track, ensuring objectives are met and goals are still in sight are benefits of having management accounts.
Many businesses view their accountant as a provider of standard accountancy services such as completing tax returns and providing payroll services – but investing in additional activities such as management accounts will definitely provide a return on investment and reap the rewards.