Your statutory accounts tell you whether the business makes money.
They do not tell you where: which activity carries the margin, which client costs more than it brings in, which site deserves to grow.
That is the role of management accounting, called comptabilité analytique in France. It uses the same figures as the statutory accounts, but sorts them according to the questions you ask.
Definition. Management accounting is an internal, optional management tool that allocates the company’s income and expenses along one or more dimensions (activity, client, site, project) to measure the cost and margin of each.
Statutory accounts and management accounting: two views of the same figures
Statutory accounts
Mandatory, they record every transaction under the French chart of accounts (Plan comptable général) and lead to the annual accounts: balance sheet, income statement, notes. They answer the question “how much did the company earn?”.
Management accounting
Optional, it allocates income and expenses by activity, client, product, site or project. It answers the question “where and how do we make money?”.
French law does not require businesses in general to keep management accounts. It is an internal tool: you choose its level of detail, frequency and format.
Some situations do require activities to be tracked separately.
VAT: a business with distinct sectors of activity must show the data specific to each sector. A single set of accounts is enough, supplemented where needed by additional registers.
Grants: the funding agreement sets the rules. Tracking outside the accounts, reconciled with them, is often accepted; some funders nevertheless ask for project-specific accounting. In every case, the costs claimed must be traceable in the accounts and documented.
In these cases, management accounting makes tracking easier, but it is not the only solution.
What it is used for
- Know the margin of each activity: consulting and training, sales and services, shop and online store.
- Measure profitability by client or project, to adjust your prices or terms.
- Compare your sites or branches.
- Report to your group in its own format and dimensions, month after month.
- Know your break-even point: the revenue at which an activity covers its costs.
- Prepare a decision: hiring, a new offer, opening a site, closing an activity.
Who benefits most
Whatever your legal form, SAS, SASU, SARL, EURL, SA or sole trader, management accounting is set up the same way. It benefits the following businesses most.
French subsidiaries of foreign groups
Regular reporting to the group, often monthly, along the group’s dimensions: management accounting is planned from the subsidiary’s incorporation. See French subsidiaries
Consulting and service companies
Margin by client or project, based on time spent. See consultants and service providers
Liberal professions and multi-site practices
Allocation of shared costs between partners or sites, profitability of each activity. See liberal professions
Retail and multi-site businesses
Results by shop, department or sales channel. See retail
Growing SMEs
Several activities, a new offer, another site: know what each one brings in before investing. See small businesses
Associations
Grants by project, commercial sector, use of donations: management accounting is first a reporting tool. See cost accounting for associations
When to set it up
Management accounting only makes sense when activity is large enough for the figures to be meaningful, and when its tracking cost stays proportionate to what you learn from it.
- Enough activity to show trends, with a tracking cost in line with the benefit.
- From incorporation, when the need exists from day one: typically French subsidiaries that report to their group every month along its dimensions.
- Activities, sites or clients that are genuinely distinct, whose margins can really differ.
- A decision at stake: prices, growth, hiring, closing an offer. Without one, tracking costs more than it yields.
- An organisation ready to track and document every expense and sale (see below).
- Ideally at the start of a financial year, so the whole year follows the same rules.
Key notions
Dimension (axe analytique). The angle from which you read your figures: activity, site, client or project. Each dimension has values, for example “consulting” and “training” for the activity dimension.
Direct and indirect costs. A direct cost belongs clearly to one activity: purchases for a product, the salary of an employee dedicated to a project. An indirect cost is shared: rent, insurance, accounting, management.
Allocation keys. Indirect costs are spread using a key: floor space, time spent, revenue, headcount. The key must reflect reality; an arbitrary key produces misleading margins.
Break-even point. The revenue that exactly covers fixed and variable costs: fixed costs divided by the contribution margin ratio.
The main methods
There are four methods. They are not steps: you choose one, depending on the question you ask.
Full costing
All costs, direct and indirect, are allocated to activities: you get a full cost and a result for each activity.
Variable costing
Costs that vary with activity are separated from fixed costs to calculate a contribution margin: useful for the break-even point and pricing decisions.
Direct costing
Each activity bears only its direct costs: you measure what it contributes towards shared costs.
Activity-based costing (ABC)
Costs are linked to the tasks that generate them, then to products or clients according to their use of those tasks: finer, but heavier to maintain.
For a small or medium-sized business, a simple approach often works better than a very fine one: a single dimension, stable allocation rules and regular reading of margins.
Setting it up, step by step
- Choose your question What do you want to know first: the margin by activity, by client or by site? This choice drives everything else.
- Start with a single dimension For example activity or site, with a limited number of values. A second dimension multiplies tracking and control work: consider it only once the first is well established.
- Set up your software Most accounting software can add an analytical code to each entry.
- Set the allocation rules Which costs are direct, which keys for shared costs, how to record time spent if your margin depends on it.
- Allocate as you go The code is added when the invoice or expense report is recorded: this is what makes the figures reliable.
- Read and decide A margin table, monthly or quarterly, compared with the budget if you have one, and/or with one or more previous periods.
What it requires from you
Management accounting relies on information only the business knows. You must provide it to your accountant, for every expense and every sale.
- Track every expense and sale in a file, for example a spreadsheet, with its allocation: which activity, client or site.
- Provide complete and accurate information: it allows your accountant to process documents quickly. If a single item is missing or wrong, the document cannot be recorded until it is completed.
- Send time spent if your margin depends on it, by project or client.
- Code your expense reports along the same dimension.
- Ask your payroll provider for payroll entries split by dimension, or the data to split them: salaries are often the largest cost.
- Keep to a regular schedule: information arriving at year end no longer helps decisions during the year.
- Plan regular exchanges with your accountant, to check each allocation and the overall consistency.
A lighter alternative: coding within the chart of accounts
When needs are simple, a hybrid approach often delivers the essentials:
- Code within the account number Relevant income and expense accounts are subdivided: one digit, for example in the seventh or eighth position, identifies the activity or site.
- Post each entry to the right sub-account No analytical module is needed, but allocation is manual: automated pre-accounting tools cannot pick the right sub-account on their own.
- Rebuild in a spreadsheet From the trial balance, a table groups sub-accounts by activity and, where needed, spreads shared costs with simple keys.
This works with any accounting software. Its limits: one dimension, shared costs allocated outside the accounts, and coding that must be applied rigorously. It is slightly less time-consuming than the full approach, but not without extra work: tracking every expense remains essential.
What it means for the workload and fees
Management accounting is an additional, tailored engagement, in several stages:
- Scoping Define with you the question, the dimension, the allocation rules and how information will be sent.
- Set-up Configure the software or sub-accounts, set allocation keys, organise exchanges with your payroll provider, reclassify past months if needed.
- First results Produce the first margin tables, review them with you and adjust the rules.
- Ongoing work Allocate every entry, check allocations and produce tables at the agreed frequency.
Why ongoing work weighs so much. Most bookkeeping is now automated: pre-accounting tools, bots and AI recognise documents and suggest entries. These tools cannot allocate an entry to an activity, site or client: management accounting is done by hand, entry by entry. Bookkeeping time increases sharply: it can double, and go beyond. The hybrid approach is slightly less time-consuming.
- The whole income statement must be split along the dimension, including salaries and social charges: otherwise margins mean nothing.
- Allocation keys take time to write, implement and maintain, and the question arises for every new transaction.
- Each additional dimension, for example geography on top of activity type, multiplies combinations and checks.
- Reporting templates must be built for the chosen dimension, then checked at each edition.
Clear expectations from the start. What you want to know, at what level of detail, how often, and what the business can provide: we agree on this together in a meeting, before any set-up.
A delicate estimate. Quoting for management accounting is delicate: the time required depends on many factors that are hard to know in advance. The director must therefore have a clear idea of what they expect, and be available to make this estimate, and then the set-up, easier.
In every case, ask for a quote. Management accounting is a tailored service: we assess with you the solution best suited to your business, your obligations and your objectives, then send you a fixed proposal in advance.
Common mistakes
- Several dimensions from day one: entry becomes heavy, codes are misapplied, figures lose their value.
- Incomplete information: every document without an allocation blocks recording and delays the tables.
- Arbitrary allocation keys: they can make a useful activity look loss-making.
- Catching up at year end: margins arrive too late to act on.
- Confusing margins and cash: a profitable activity can consume a lot of cash, and vice versa. See forecasting and cash management
Estimate your budget now, for your situation: estimate my budget
Frequently asked questions
Is management accounting mandatory in France?
Not for businesses in general: it is an internal tool. Some situations require activities to be tracked separately: distinct sectors for VAT (a single set of accounts, supplemented where needed by registers, is enough) or grants to be justified under the funding agreement.
Can it follow our group’s reporting format?
Yes. For a French subsidiary, dimensions and tables can follow the group’s chart and calendar, alongside the French statutory accounts. See French subsidiaries
When should it be set up?
When activity is large enough, activities or sites are genuinely distinct and decisions depend on it, or from incorporation when the group requires monthly reporting. The start of a financial year is preferable.
Do we need specific software?
Not necessarily. Most accounting software handles analytical codes, and the hybrid sub-account approach works with any of them. A spreadsheet is enough to track expenses and sales.
What must we provide?
For every expense and sale, its allocation, tracked in a file for example; coded expense reports; time spent if your margin depends on it; payroll entries split by dimension from your payroll provider. Complete and accurate information on a regular schedule: an incomplete document cannot be recorded.
How much does it cost?
It is a tailored service: with the full approach, bookkeeping time increases sharply and can double or go beyond; the hybrid approach is slightly less time-consuming. Quoting is delicate: clear expectations and your availability make the estimate, and then the set-up, easier. Ask for a quote: we assess the solution best suited to your business, your obligations and your objectives. Book a meeting
The forecasts, cash-flow plans, dashboards, simulations, studies and analyses mentioned above are additional engagements, à la carte. Each one is quoted in advance, at the frequency you choose.