Accounting technology / Glossary / Management accounts

What are management accounts?

Definition

Management accounts are the financial reports a company prepares for its own directors and managers, usually monthly: a profit and loss account, balance sheet and cash flow compared with budget and the prior year, with key performance indicators and commentary. Unlike statutory accounts, they have no required format and are not filed or audited.

Also calledmanagement reportingmanagement packmonthly management accounts

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Usual frequency: Monthly
Audience: Directors and managers
Format: No required format

What management accounts contain

A typical pack opens with a one-page summary of results, cash and the main messages, then the profit and loss by month and year to date against budget, forecast and last year, the balance sheet, a cash flow and cash forecast, and KPIs chosen for the business, such as revenue per customer, gross margin, headcount or DSO. Commentary explains the significant variances. The pack goes out a set number of working days after month-end, so it depends on a reliable close. Accounting firms prepare management accounts for clients as part of client accounting services, often to support bank covenants. The term is used mainly in the UK, Ireland and Commonwealth countries; US companies call the same thing management reporting or the monthly financial package. Helu automates management reports for small businesses; Abacum, Aleph and Pigment build them on larger planning models.

Common questions

What is the difference between management accounts and statutory accounts?+

Statutory accounts follow accounting standards and company law, are produced annually and are filed and often audited. Management accounts are internal, produced monthly or quarterly, and laid out however the business finds useful.

Are management accounts required by law?+

No. Companies must keep adequate accounting records and file annual accounts, but monthly management accounts are a management choice. Lenders and investors often require them under loan or investment agreements.

How soon after month-end should management accounts be ready?+

Typically within one to three weeks, depending on the size of the business and how fast it closes. The faster the close, the earlier the pack, so days to close drives it.