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Management reports: the future of accounting

16th Sep 2015
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Accountants working in business often complain that practitioners are so tied up with statutory accounts, audits and tax returns that they have no idea about what actually goes on in the real world.

But that perspective is becoming less credible. In-house accountants buried in the minutiae of their own business may not always appreciate that practitioners can draw on experiences and insights gained from hundreds of businesses. And with the growth of the “virtual FD” concept, many accountancy firms are now carrying out core management accounting tasks such as strategy and KPI formulation, planning, investment appraisal and preparing and discussing monthly management packs (see box below).

Practice Excellence trends

● 31% of 2014 shortlisted firms offered strategic support to clients

● 25% operated in some kind of business advisory niche

● 17% prepared and delivered KPIs for their clients

● 17% offered a full “virtual FD service”

● 14% offered business planning services.

This article sets out to look in more detail at the shift from compliance to management reporting and whether this trend holds the key to accountancy’s future on both sides of the business/practice fence. It will examine the kinds of activities being under taken and how management reporting is evolving in this new environment.

The Virtual FD model

Half the firms entering the Practice Excellence Awards this year (PEA15) offer management information as part of their service for business clients - up from 33% in 2014. One reason for this jump is that the approach has been shown to have a very beneficial effect on client satisfaction and practice profitability. Probably because it serves a fundamental client need.

Businesses with a poor grasp of management information are going to be at a disadvantage. Entrepeneurs are not always well versed in financial matters and if they lack these skills they may lack the knowledge they need to stay in control of their business.

Until they reach a certain size, small firms are not able to afford £30,000-£50,000 a year for a trained accountant to handle their management and financial reporting. This gap has existed for years. Now that online accounting tools make it possible for external accountants to oversee the accounting journals and reports, we have witnessed a surge in financial management outsourcing among small businesses and the accountancy firms serving them.

Those fast-moving entrepeneurs may also be so caught up in the rush of day to day demands that they don’t have the time to sit back and reflect on what their financial numbers are telling them. The virtual FD can step up to fill that strategic void, and help the business plan not just for the short-term, but for the future.

What kind of management information?

While many practices are becoming the finance team that puts together monthly reporting packs for company managers, Receipt Bank founder and CEO Alexis Prenn argues that monthly management accounts are not the future of accountancy. Cloud technology has changed the dynamic of accounting so much that advisers should be thinking more creatively about what they could do with this information.

What if accountants and businesses could get their hands on transactional data even more quickly and efficiently? Why not produce weekly management accounts?

In a scenario that is familiar to accountants on the Australian accounting conference circuit, specialist bookkeepers are now doing this for Antipodean coffee houses and eateries. “Cafés can run up costs very quickly - if you have three unprofitable weeks, you’re sunk. With online tools and transaction capture, the café can close its books on Sunday and get the weekly management accounts by Tuesday,” Prenn said.

Accountants with specialist knowledge and clients in this market will understand what each café’s performance metrics need to be and be able to respond more quickly if problems arise. “They can get more creative and look at what the business should look like in 12 weeks,” Prenn suggested.

It’s an intriguing vision, but not one that completely convinces Spotlight Reporting’s managing director Richard Francis.

“Management accounting is a halfway house” said Francis. But having access to real-time numbers is not a strong enough foundation to push practitioners down the advisor route: “What if they don’t have the right skills?”

Those skills need to include the ability to use the data to derive client-specific insights - and then present them to the client in a meaningful form, he continued.

The rise of the virtual FD has been accompanied not just by cloud accounting software such as FreeAgent, KashFlow, Xero, QuickBooks Online and Sage One, but also by associated tools that help advisers to analyse and present accounting numbers. For many advisers, this might well be Excel, but the accountant’s best friend is getting a run for its money form cloud reporting add-ons such as Spotlight and rivals including Fathom, CrunchBoards and many, many other cloud tools.

A common theme from all of these developers is that the management accounts are not the product, but a vehicle that helps the accountant to deliver relevant advisory products and services to their clients.

CrunchBoards founder Hannah McIntyre explained,” We designed the product from the business owner’s perspective. It’s about giving a tool to the accountant so they can create information that their clients need fast and efficiently. That speeds up their practice, but ultimately it’s about the conversation.”

She argues that Excel is too cumbersome to respond to “what if” discussions with small business owners. Spreadsheet tools hold accountants back from offering small business clients valuable services such as cashflow forecasting, “which is what they need most”.

This is the kind of quick and flexible reporting CrunchBoards tool was designed to produce, she continued. It allows small businesses and their advisers to compare multiple options and different planning scenarios. “If expansion does go ahead, you can compare actuals v forecasts and see how you would get on - or let the bank manager and investor see,” she said.

For Spotlight Reporting, the emphasis is more on accuracy than speed, but Francis too described his product as a “gateway tool” for advisory services. “Reporting and business intelligence allow you to have conversation about the future rather than past. We visualise it so the client can understand it,” he said.

“That allows the accountant to have a two-way dialogue with a client who’s not confused by the P&L and balance sheet. The accountant is more or less forced to give advice.”

MyAccountancy Place, Woods Squared and Kinder Pocock are just a few PEA15 entrants that are achieving great results with management reporting services.

As part of an all-round re-engineering project for a web design client, Kinder Pocock linked Xero to its ecommerce systems. Drawing on this detailed data, the firm produces management reports including forecasts that have helped the agency attract new investment and negotiate a sizeable overdraft from its bank.

Introducing smart cloud technology to automate the finance function of small business owner clients has had a profound effect at MyAccountancy Place, according to founder Paul Barnes. “Previous to beginning their relationship with our firm, many of our clients would only really understand the profitability of their business once a year when they met their accountant. With accurate daily reporting and expert advice from qualified professionals, our clients are able to take control of their profitability day in, day out,” he said.

Stephen Paul at Valued Solutions has gone a step further and created a management reporting consultancy and mentoring programme. The service hasn’t just benefited clients, but has had a positive effect on staff retention because people get to do more interesting work.

There’s a real turn up for the books: accountants actually like producing useful reports.

Find out more about what accountants like Stephen Paul and Sharon Pocock think about the profession's future at AccountingWEB's Practice Excellence Conference on 24 September in London. Click the graphic for more details:

Replies (17)

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Adrian Pearson
By Adrian Pearson
16th Sep 2015 17:45

Shifting away or adding-to?

Are firms really shifting away from compliance work? Or are they, in fact, adding consultancy services on top of that work?

Accountancy firms can upsell additional advisory services when they have an existing relationship with the client from dealing with their year-end accounts. However, I do not believe many (any?) are being successful at selling "pure" advisory services to clients for whom they provide no compliance services at all.

Are you seeing examples of this in the firms you reference?

Thanks (2)
Sarah Douglas - HouseTree Business Ltd
By sarah douglas
17th Sep 2015 09:06

This seems

John without sounding cheeky this is a very old concept and is been done regardless if a client is on a cloud software or not.  I know loads of accountants and bookkeepers in Glasgow who have been providing monthly and weekly  management accounts for over 20 years as the main part of their business.   That is what we provide our clients every month within 7 working days of month end.   

These services our basic.  Accountants- bookkeepers have been using these types of  reports to consult for years if they are doing this type of work. 


Thanks (2)
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
17th Sep 2015 11:47

It's a fair cop

OK, OK - guilty as charged. I confess you may have a point that I’m looking at this through trend-spotter specs and have overlooked precedents that have existed for years. Adrian's point about adding reporting to the service portfolio is also something I failed to mention.

But the dramatic rise in firms mentioning this kind of service as part of their entries to the Practice Excellence Awards is unmistakeable, and to be honest I have talked to a lot of business managers who criticise their accountants for never looking behind the statutory accounts and tax returns and never offer any meaningful business advice.

What I think the PEA15 entrants are telling us is that where previously management accounting and virtual FD services were an esoteric niche occupied by the likes of Chris Downing at Milsted Langdon, cloud tools have taken the concept mainstream.

The “future of accountancy” is a hypothesis of mine that always seems to stimulate an interesting response (like the exchanges that I witnessed between Alexis Prenn and Richard Francis) so I thought I would pull together my thoughts here and see if I could take the debate a step further. By documenting the trend I'm also hoping to illustrate how well it's working for those who are making this move, which might encourage other accountants to explore the approach.

I’ll also be interested to see if any management accountants stumble on to this thread to see what they think of all these practitioners encroaching on their turf. Once again, the exchanges that take place across that particular fence may help enlighten us all.

Thanks for picking me up on my questionable journalistic tactics, but I hope you’ll accept I succumbed to them with honourable intentions.

Thanks (0)
Sarah Douglas - HouseTree Business Ltd
By sarah douglas
17th Sep 2015 12:33

Trend Changing

Hi John 

I appreciate your honesty. Were I feel there is a trend change is that Bookkeepers have been providing Weekly and Monthly P& L to business for years and leaving Depreciation and Tax to the accountant at the year end clearly depending on the level of the bookkeeper.    Companies are aware of CT Rate and Deprec and that can be accrue anyway into the working out with the software.  

I personally think if your TB is spot on and accurate to the penny .  The P &L is extremely easy.  The trend change is that a lot of accountants were turning down this business as they were not prepared to be involved in the bookkeeping and saw it as a dirty work.

  For example we have clients that literally supply you with a large shoe box each month and ask you to sort it.  Their not interested in doing the Bookkeeping  how ever they are very  interested when they see how much they have spent under various cost codes and what is causing the problem and that is where bookkeepers know because they input the invoices.   We charge for our management accounts which is different to the bookkeeping rate to TB.  It is a good money earner.  

The trend is that accountants now realise they may have to do some bookkeeping.   I know from experience you earn the higher amount when it is you that has completed the books the client knows and is happy to pay for that personal service. 



Thanks (0)
By Scriptic
17th Sep 2015 14:13

Virtual FD

That offering virtual FD services is important to SMEs is beyond dispute but the first criteria for most of them has to be that the online service is simple, straightforward and comprehensive. Because it fits that bill we have a couple of clients who use figurewizard with the advantage for us is once they have their forecasts, they want to talk to us about them. We use it too for clients who don't. Surprised that it rarely seems to get a mention.

Thanks (1)
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
17th Sep 2015 14:37

Opportunity for bookkeeping

You're not wrong, Sarah and one of the things I could have mentioned about the trend to advisory work is that unlike Adrian's scenario you don't necessarily have to connect it to the compliance side of things (although it does make sense to have the same firm handle both).

What I did notice on a trip to Xerocon in Denver was the extent to which unqualified bookkeepers* (oops - see below) were moving into management report-driven advisory services. They might have someone on the team who completes the tax and accounts, but they look at that as almost an afterthought. It's a much more distinctive pattern over there, where the profession has been a bit slower to embrace higher risk business advice services, but I suspect similar incursions may be happening over here - and the people doing it are the ones with access to the clients books.

Thanks (0)
Adrian Pearson
By Adrian Pearson
17th Sep 2015 15:35

Can we have some evidence please?

Jon - I am genuinely interested in the idea that "you don't necessarily have to connect it to the compliance side of things" so would appreciate any non-anecdotal evidence you can provide on this.

I my view, bookkeeping IS a compliance service, so I think my point holds. To perhaps be clearer then than in my first response: I'd love to know more about any accountants/bookkeepers who are providing management report-driven advisory services to businesses for whom they do not already provide year-end accounts/bookkeeping services.

As I say, not being argumentative here - any firms succeeding at selling management report-driven advisory services not on the back of a compliance relationship are truly ground-breaking and we might all learn something from them.

Thanks (0)
Sarah Douglas - HouseTree Business Ltd
By sarah douglas
17th Sep 2015 16:42


Hi Adrian and John

Personally I was talking about qualified bookkeepers as opposed to unqualified.  

I not sure if I am hitting the mark here so please bear with me.   As you may know as a practice we have always said we love the bookkeeping and management reporting.   We also work with many accountant firms where we are doing the bookkeeping - management accounts and they are completing the compliance.   All the clients are happy infact most of them arranged that way. We have accountants who put clients our way as they do not want to do the bookkeeping or the management account role.    This works really well if there is a trust between parties and both parties have set up their profit structure to make a profit. 

For example if they have a accountant already we are very clear we will not cross over into their ground, but what is being missed is that human touch.   We have instant chat for all our clients and it is set up on our computers as well as phones.   Our clients instant chat , text or email us sometimes about the most random things that are concerning them.  We charge for this service. 

We have set up our business that no matter what is worry them they can phone no matter what.  So we charge for the services and advise we want to give, like say a extra level of reporting or a solution to their problem. They if they what a detailed tax advice or a other type of advice we source for them and deal with their accountant for them. 

What is missing is sometimes Directors like to have a buffer between them and the accountant and their is a different type of trust and relationship with all parties involved.

It works the moment we have a client who uses us as a buffer between them and KPMG . They love KPMG but like us to be involved and feel we have a lot to offer their company.  It is what ever works for that director you may think it is silly but there is a business out there.  Directors are very good at seeing the different skills that Various options can offer. 

It works if it is not a competition and all 3 parties work well together. Its not about that one party could do it all for directors it is about getting different skill sets and developing that trust and knowing which party suits which role best.   Sorry for long post. You could call it managed services


Thanks (1)
By raybackler
17th Sep 2015 16:35


Thanks for the heads up on figurewizard.  I have signed up and I am in the process of producing my first forecast on it.

Thanks (1)
Man of Kent
By Kent accountant
18th Sep 2015 09:57

Second thanks

@Scriptic/raybackler - thanks - for £20 a year I'll have some of that!

Perfect timing, have a meeting with a client on Monday where this will come in very handy!

Thanks (0)
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
18th Sep 2015 12:42

Poor wording again - apologies

I'm sorry this keeps happening this week. I'm not doing my cause much good by using imprecise language. When discussing the US examples, I should have said "bookkeepers and unqualified accountants" rather than unqualified bookkeepers. Sorry Sarah! 

I think Adrian caught me out on another weak sentence about connecting compliance to reporting. I should have probably phrased it to point out that the main emphasis of the service was shifting in that direction. Most of the bookkeepers in the States I talked to answered "Oh yeah, we do that too" when I asked them about tax and annual account filings.

In the absence of more concrete evidence for my statement, I have to thank Sarah for providing more concrete evidence of this trend.

Thanks (1)
Sarah Douglas - HouseTree Business Ltd
By sarah douglas
18th Sep 2015 13:47

Your welcome John

I had thought that is what you meant but was unsure.  

Thanks (0)
By PKan
20th Sep 2015 21:37

Understanding the mechanics of the business

Producing timely performance reports whether financial or statistical should be the norm, technology is allowing data from different areas to be processed and reported at a faster rate. The purpose of all this is to help steer the business along its path to the short, medium and long term objectives.

The most important two things to know are the business and the sector(s) in which it operates if you don't understand these then how can you advise? 

Thanks (1)
By raybackler
21st Sep 2015 08:47


Business is about making money and there are infinite ways to do that.  Accountancy is about money, as the common denominator, and all the accountant needs to do is learn the key drivers in any given business sector.

Thanks (0)
Replying to Ian McTernan CTA:
By PKan
21st Sep 2015 22:54

Partly agree

In that there needs to be more involvement than purely the money side in a business.


Its about negotiating the world of business and commercials, aligning targets , being realistic, helping to redefine the processes and identify the key indicators, learning to play well in the arena , maintaining staff moral and involvement in operational performance and financial improvements, testing opportunities etc etc too much to list 


learning the drivers are part of it but there is more that companies need from their advisor in this era than being able to pick a balance sheet and p&l apart and thinking you know what makes the clock tick one really does as it is a market place and things are always changing ....

otherwise every business would be a roaring success or never fail and we know that this is more not the case than it is the case and that goes for the micro to global business

So....the point is that business is constantly on the move nothing is static and unless you are at the coal face I am afraid that being linked to their accounts package by the cloud enables you to see only the numbers and help only in this respect ...

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Adrian Pearson
By Adrian Pearson
28th Sep 2015 09:42

Some real-world stats

Last Thursday I presented a break-out session at the AVN Accountants Conference. There were about 100 accountants, from small, independent firms in the audience.

I asked those who provided advisory and other value-added services to their clients to raise their hands. As I expected, as far as I could see, everyone in the room put up their hand. I then asked them to keep their hands raised if they provided a significant volume of such services to clients for whom they did NOT also provide a year-end accounts and tax compliance service. All hands were lowered apart from 5.

Of the remaining 5, I asked if they were pure, advisory-only firms with no year-end compliance work at all. Non responded yes.

So, my conclusion from (fairly) independent real-world, UK data is as follows: year-end accounts work is key to providing additional advisory and other value-added services. These more profitable services are built upon an existing compliance relationship.

Do the accounts > establish the trusted advisor relationship > then sell the good stuff.


@Jon - it would be great if Aweb could use its database to undertake a proper survey and report back?

Thanks (0)
By AndrewV12
06th Oct 2015 15:18

A good article

A very good article, lost it way a bit when it mentioned weekly management reports, not for me, quarterly are fine.

Remember some clients only want management reports so they can estimate the tax payable and  ...errrrrr how can i put it, implement their own tax planning, well at least they look at the management reports.


But a great article, the knack is to get clients to pay for such services, if you can very well done.


In my experience the good clients know how much profit they are going to make and dont need the management accounts and the muppet clients who blow all the income and state, I have not made any money, its all in all out.  


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