The production of accurate and timely management accounting reports form part of a trust CFOs role. Accurate management accounts enable effective strategic decision making and allows for trusts to adapt to changes when required.
The Academies Financial Handbook requires the academy trust to have in place sound internal control, risk management and assurance processes. It also highlights that a trust’s internal framework should include:
- Coordination of the budgeting process
- Applying financial discipline, including managing debt and cash flow monitoring
- Preparing monthly budget monitoring reports
The benefits of following the statutory obligations of the Academies Financial Handbook will mean you have an informed picture of your current financial position, whereby budgets can be compared against spend and variances can be addressed as a priority. This will translate to effective forecasting for the year and determines where costs can be adjusted.
Effective management accounts should comprise of an income and expenditure account, a cash flow, KPI data and a balance sheet summary; Automation of systems may help in reducing the time taken to create this data.
As the main benefit of management accounts is to allow for successful and accurate forecasting, it may be useful to transfer data to Excel. Although there is no prescribed format for presenting the accounts, Excel allows CFOs more flexibility to present data in a fit for purpose format, whilst the Academies Financial Handbook does set out specific requirements for how management accounts should be reported to trustees, it is the job of the CFO to ensure senior leaders and trustees understand the information presented. Any significant variances or areas of risk in the accounts should be included to ensure that all stakeholders are made aware of the financial challenges facing the trust.
The Academies Financial Handbook requires monthly management accounts being sent to the chair of the trust at the end of each period and all other trustees no less than six times a year, with the latest management accounts being presented in both the finance committee meeting and the trust meeting. To follow further best practice it is also advisable for budget holders to receive monthly monitoring reports in respect of their budgets.
Income and expenditure report: This should set out the spend against budget, as well as an annual re-forecast. With clear explanations for material variances.
Balance sheet: The monthly balance sheet review should include cash at bank and in hand, creditors, debtors, net current assets and pension scheme liabilities.
Cash-flows: Preparing a cash-flow statement is an important tool for making decisions on liquidity ensuring funds are available to make both creditor and salary payments and to avoid payments being returned or leading to an unauthorised overdraft at the bank. It also assists in timing strategic spend decisions.
Annual accounts: The Department for Education (DfE) require accounts to be completed, audited, signed off and submitted to the DfE by 31 December each year. It is recommended that the autumn term governing body dates are set in place to allow for sign off of financial statements.
If you are new to producing management accounts, could use some additional support in preparing them, or already have too much on your plate and would like a professional to visit you and produce them on your behalf, click the button below to request a no obligation call back to discuss your requirements.