What management accounts are for
Your year end accounts are written for HMRC and Companies House. They arrive months after the year has finished and they follow strict formats. Management accounts are written for you. There is no legal requirement to prepare them, which means they can be laid out in whatever way helps you run the business.
A restaurant owner on the Fulham Road might want to see food and drink costs as a share of sales each month. An estate agency in Parsons Green might care most about fees by branch and the pipeline of sales agreed but not completed. A small online shop might want stock levels and margins by product. The reports should answer the questions you actually ask yourself.
What a typical pack contains
Every pack starts with the basics, then we add the measures that matter to your trade. We keep it short. A pack that runs to thirty pages rarely gets read.
- Profit and loss for the month and the year so far
- Balance sheet showing what the business owns and owes
- Cash position and a short forecast of the weeks ahead
- Comparison with your budget or the same period last year
- Money owed by customers and to suppliers, by age
- A page of plain English notes on what has changed
What is included
- Monthly or quarterly profit and loss and balance sheet
- Cash position and short term cash forecast
- Budget preparation and budget against actual reports
- Accruals and prepayments so each period is fair
- Customer and supplier balance reports
- Measures that suit your trade, such as margins or sales per site
- A written review of what has changed
- Figures ready for banks and lenders
Getting the numbers right first
Management accounts are only useful if the bookkeeping underneath is accurate and up to date. Before the first pack, we check that the bank is reconciled, that sales and costs sit in sensible categories and that big items are not distorting a single month.
That last point matters more than most people expect. An annual insurance premium paid in one go makes that month look terrible and every other month look better than it should. We spread costs like insurance, rent paid in advance and annual software over the months they cover. We also add in costs you have incurred but not yet been billed for, so each month shows a fair picture.
Budgets and cash forecasts
Many owners find a budget most useful once they have a few months of reliable figures. We build it with you from your actual results, adjusted for what you expect to change, such as a new hire, a price rise or a second site.
Cash is often the bigger worry. A business can be profitable and still run short of money, because of VAT quarters, corporation tax, staff costs and slow paying customers. A rolling cash forecast shows the tight weeks before they arrive. It is especially useful for businesses that pay a large VAT bill or corporation tax in one go.
Using the reports to make decisions
Each pack comes with a short review. We point out what has moved, what looks unusual and what may need a decision. Sometimes that is a supplier whose prices have crept up. Sometimes it is a customer who has drifted from paying in 30 days to paying in 90.
Management accounts also help when you talk to a bank or a landlord. Lenders often ask for recent figures, not last year's accounts, when you apply for a loan or an overdraft. Having a tidy pack ready saves weeks.
Mistakes that make reports misleading
The most common problem is treating the bank balance as profit. Money in the bank may already belong to HMRC as VAT, PAYE or corporation tax waiting to be paid. We show those amounts clearly on the balance sheet so you can see what is really free to spend.
Another is stock. A shop or restaurant that counts stock only once a year will see its margins jump around from month to month, because purchases are recorded when they arrive, not when they are sold. A quick stock count at each month end, even an estimate for small items, makes the gross margin far more reliable.
Owners also tend to compare a month against the one before it, when the better comparison is the same month last year. A bar near Fulham Broadway will always be busier on match days and in the run up to Christmas. Comparing like with like takes the season out of the picture and shows the real trend.
How often and how we work
Monthly reports suit businesses with tight margins, staff or stock, such as hospitality and retail in Fulham Broadway and Chelsea. Quarterly reports are often enough for smaller service businesses. We agree a day each month or quarter by which you send any paperwork, and we aim to deliver the pack soon after so the figures are still fresh.
Fees are fixed and agreed before any work starts, after a free review of your records and what you want the reports to show.
Who this suits
- Owners who only see their figures once a year
- Restaurants, bars and shops with tight margins
- Growing companies taking on staff or a second site
- Businesses applying for a loan or overdraft
- Directors who want to plan for VAT and corporation tax bills
- Companies with investors or partners who expect regular reports
Common questions
Do small businesses need management accounts?
There is no legal requirement. They are worth having once you have staff, stock, borrowing or more than one site, or if you simply want to know where you stand during the year rather than after it.
What is the difference between management accounts and statutory accounts?
Statutory accounts follow set formats and are filed with Companies House and HMRC once a year. Management accounts are internal reports, prepared more often, laid out to help you run the business.
How long after the month end will I get my report?
That depends on how quickly your records reach us. With bank feeds and receipts uploaded as you go, we can usually deliver within a couple of weeks of the month end. We agree the timetable at the start.
Can you produce management accounts from Xero?
Yes. Most cloud software, including Xero, has good built in reports. We tidy the data first, add any adjustments and then present the figures with our notes.
Will management accounts help with my tax planning?
Yes. Seeing profit during the year gives time to think about things like when to buy equipment or how much to pay in dividends, rather than finding out after the year end when choices are limited.
Do management accounts include VAT and tax owed?
Yes. The balance sheet shows VAT, PAYE and corporation tax that are owed but not yet paid. That way the cash in your bank is not mistaken for money you are free to spend.
Can you prepare a budget for a new business?
Yes, although with no trading history we build it from your plans, costs you have already agreed and sensible assumptions. We then compare it with your real results once you start trading.