Management accounting is the provision of financial data and advice from a company’s historical buying and selling information, which produces forecasts to a company or organisation for the development of its business.
It’s a procedure which identifies what goods or services you sell, and what percentage of profit they generate.
This can be done from:
These reports highlight where you are making very good profits, or where you could improve them. Sometimes, it highlights certain things that you may be better off not selling, as they are losing you money.
It can also identify where you can increase your prices, though only by a small percent. Nobody wants a huge price hike, as they will simply get the goods or services from another provider.
It is a good suggestion to increase prices annually, or more frequently if the goods you supply are dependent upon weather, e.g. in the food business. If we have a bad year weather wise, the cost of buying and selling these goods will have to increase. Other factors may play a part, such as the cost of oil having an effect at the fuel pumps. If you have to have goods delivered from out of your area, all this will determine the cost that you have to sell your goods.
You may want to diversify your business. Discussing these issues with your Bookkeeper can help you to decide if it is worth it.
