Management Accounting vs Statutory Accounting; where should we spend more time?
I'm always surprised by the lack of attention the preparation of internal financial data and reporting gets compared to statutory reporting in a school environment. Statutory reporting is one of those necessities to which we must attend to ensure we remain compliant with the legal framework in which we operate. We have a responsibility to get financial information in a prescribed format and within a published timeframe to a variety of stakeholders such as the LA and ESFA to enable them to perform their responsibilities. However, rarely does the format they require support us in really understanding the financial performance of our schools, or give us the in-depth analysis of the financial data that is necessary to aid decision making. Statutory reporting is something we must do and we must get right, but management accounting is what will support us with improving the performance of our schools. Management accounting is exciting. Not the actual production of the information itself, but the outcome of what it tells us and the valuable insight into our schools that it gives.
Management Accounts v Financial Accounts
So, what should good management accounting information look like? The education sector here is no different from any other industry and there are basic components that you would expect to see:
And all of this to be produced monthly.
Business managers will often tell me this is a lot of work and I totally agree, the preparation of sound monthly financial information is never going to be a quick or easy task. The team at SBM Services prepare monthly management accounts for many of our clients and it is a big challenge, but the effort is, without question, worth it. To have your finger on the pulse of the financial performance of your school or trust has to be a necessity in the current financially challenging climate. In every business, the Finance Director is always the next most senior person to the Managing Director or CEO for the very reason that they need to have up to date financial information at their finger tips to monitor, steer and control the business, and it should be no different for headteachers and CEO’s in schools.
So, let's get management accounting up there at the top of our ridiculously large job lists. We can’t do everything but solid internal financial reporting is not something we can let slip.
By Justine Berkeley - July 2017