Notably, many of our growing agencies are now using them both as a management tool to inform strategic decisions, and to keep track of performance.
But, whether you are currently using management accounts, or you are not getting the maximum value out of your reports, this article looks at three common mistakes and ways to improve your reporting.
“Every recruitment business needs access to the right information, in a timely manner, and produced such that you have confidence in it. Management accounts should form a central tool for your business.” Majid Sadeghi, Partner, Rouse Partners
Mistake 1: You can’t improve what you don’t measure
Management accounts are fundamentally different from financial accounts. They should be aimed at the needs of internal stakeholders and produced more frequently to give ongoing results which can be used to review, benchmark, refine and reward.
Often we see businesses with what they refer to as ‘Management Accounts’ (because they’re produced monthly or quarterly) but they look just like the annual Financial Accounts. In that form they are useless and doing no more than simply keeping score.
Key to getting the most from management accounts is choosing the KPI’s that are right for your business.
“We are seeing a rise in non-financial measuring within management reports. If attracting candidates is key for your business, why not include online registrations, or CV’s received in your management accounts reporting. By the same token, the number of applications, jobs posted, pipeline business, client feedback scores etc could be just as important.” Leighton Bower, Partner, Rouse Partners
Mistake 2: Misinterpreting the results
Management accounts should provide detailed reporting that includes all the key performance indicators for the business (such as income, costs, margins and pricing).
Equally, you should consider whether comparing offices, regions or team member performance is also important for your reporting. Finally, performance should be analysed against forecasts and budget, prior periods and variances between them.
The big mistake here is in interpreting the results. If your accountant has experience in the recruitment industry it should mean that they understand the industry metrics and norms. They will therefore be able to provide clear explanations, recommendations and steer management into the areas where attention is needed.
“We usually meet with clients regularly to discuss their management accounts to ensure that we are focusing their attention in the right direction. For some businesses their management accounts can amount to a lot of numbers. So our report is pre-faced with a summary page – which is especially helpful for our recruitment clients in showing key trends.” Majid Sadeghi, Partner, Rouse Partners
It is also important that you have a good relationship with your accountant, since it is very unlikely that such comprehensive information can be produced without a strong relationship and understanding of the operational dynamics of
your business.
Mistake 3: Not doing anything about it
Your management accounts should be shared with relevant members of your management team across the business to ensure that actions to improve profits and cash flow, or reduce costs and risk, can be taken.
You should ensure that you have structured review meetings to discuss and agree actions with set timescales to implement any changes or investment needed.
“Don’t only focus on where you are coming up short. A high performing office, excelling member of your team or industry niche boom could be well worth exploring, with the view of sharing that knowledge, way of working or new opportunity across your business”. Leighton Bower, Partner, Rouse Partners
Contact our recruitment accountants
If you are looking to set up or improve your agency’s management reporting contact our team who have significant experience helping other recruitment businesses across London and the South East.
Award-winning chartered accountants offering tax, audit and advisory services.