How to Master Management Accounts
Year end can be a stressful time for Trusts and final year end figures are not always what was expected.
Monthly Management Accounts are an important component in ensuring good Financial Management within your Trust. See our top tips below for the completion of your Monthly Management Accounts to ensure you are compliant with the Academy Trust Handbook and that your data and reporting to Trustees is accurate and timely.
Frequency
The Academy Trust Handbook states that Management Accounts must be completed and sent to the Chair of Trustees monthly. With all other Trustees having oversight at least six times per year. This is to ensure Senior Leaders and Trustees are kept up to date of the Trust’s financial position throughout the year, in a timely manner.
We advise having the reports ready by the 10th -15th working day of the following month.
Format
To again reference back to the Academy Trust Handbook, the management accounts must include;
An Income & Expenditure Account
A Variation to Budget Report
Cashflow Forecast
Balance Sheet
We believe that an Executive Summary is a great addition to the Management Accounts pack.
Your Executive summary should cover the main points a reader needs to know; in non-jargon language so that it is understandable by all. Trustees may not be too concerned with all the detail and, if they do not have a financial background, may be overwhelmed by all the data. On the other hand, a more detailed version may be more beneficial to the SLT as they will require a sufficient level of detail to understand which areas are over/under budget.
We also advise that you should present an accurate forecast each month, informed by the variances from the Management Accounts and an up-to-date Working Budget.
For best practice, Budget Holders should also be provided with monthly Income and Expenditure accounts and/or transaction lists relating to their departments, for reconciliation to ensure any mis-postings are identified and resolved.
Where to Start
One thing we find that is often overlooked is the Balance Sheet. It is imperative that the Balance Sheet is interrogated every month, to ensure you are happy with all balances, before you look at any Income & Expenditure report or review any Variances.
The reason for this is to ensure completeness and accuracy. If your Bank isn’t reconciled or your payroll control accounts have unexplained balances on, then the data in your Income and Expenditure report will not be accurate.
Accruals Concept
Rather than reporting on Income and Expenditure when it has been received or incurred, we instead need to report on actuals based on when they relate to.
We do this via Accruals, Prepayments and Deferrals. These should be completed on a monthly basis to ensure we accurately reflect the true financial position in the Income and Expenditure Report.
Some finance systems allow you to do these adjustments as you post the documents, otherwise it can be helpful to ask your processors to include the dates that the transactions cover in the system, to allow identifying necessary adjustments that much easier.
We hope these tips will contribute to a smooth month-end and year-end process with less possibility of unexpected and occasionally unpleasant surprises! If you need help with preparing month end Management Accounts please don’t hesitate to get in touch.