Should SMEs produce monthly management accounts?

A campaign to persuade more small businesses to undertake monthly management accounts has received the backing of business secretary Vince Cable. The Doing Business Together (DBT) campaign, which is backed by the CBI and the British Bankers Association, received the boost as Cable was preparing to launch a series of forums today to generate support.

The campaign has at its centre Chris Poll, the entrepreneur behind Future Route/CreditPal, a company that produces software designed to aid the production of monthly accounts. He founded the campaign "in an attempt to close the gap between SMEs and the finance and credit industry by facilitating an increase in awareness that will hopefully result in improved trust and understanding", according to the DBT website. In short, DBT aims to make it easier to access credit through the creation of more up-to-the minute accounts.

The Financial Times reports today that Vince Cable had said the campaign "sounds eminently sensible". He is reported saying DBT would bring "together lots of different groups with an interest in small business financing, a sector where there are serious problems".

Comments on the story at the Accountancy Age website include:

"Vince Cable clearly does not live in the real world. Businesses are struggling and he is suggesting monthly management accounts. Who produces these? The proprietor, a new member of staff, the external accountants? Either way this is more cost/time spent on administration. If he wants to really help business, simplify tax by abolishing NIC and increasing income tax. This will not only remove the hassles of red tape but substantially cut the effectiveness of tax avoidance schemes. It will also give business a level playing field."
Jon Faux: Faux & Company

"Of course businesses should measure performance – be that with the help of monthly management accounts or other indicators. Anyone arguing otherwise would have to be in a very sound financial position now to have any credibility. Those businesses that have consistently kept on top of performance monitoring should, on average, be far better placed now than those who have drifted along through the good times and now begrudge spending time and money on this issue."
Jennifer Davies

I disagree with John Faux. Monthly management accounts would give any bank or other external investor more comfort over the management team and their ability to control their own business. It really isn't that costly to keep decent accounting books and records and any company wanting its finances to be taken seriously would see producing monthly accounts as adding more value than just 'cost/admin'.
Peter James

"Monthly management accounts? for sole traders whose income is declining? Nice work for the accountants but unless we are willing to put our letters and blood types on these accounts, the banks will still ignore them."
Eleanor