Management accounts

Internal financial reports produced monthly or quarterly so you can steer, rather than annually so you can file.

What it means

Management accounts are a profit and loss account, a balance sheet and usually a cash summary, produced during the year for your own use. They are not filed anywhere and do not have to follow the format of statutory accounts.

Why it matters

Statutory accounts arrive months after the year they describe. By then every decision they might have informed has already been made.

Management accounts turn financial information from a historical record into a control. Businesses that get them monthly make different decisions from those that get them once a year, and almost always better ones.

What it looks like in practice

Ask for: this month against the same month last year, a year-to-date figure, gross margin split by the parts of the business that behave differently, and an aged debtors list.

Read them within a week of receiving them or the habit dies. Fifteen minutes and three questions is enough.

What to watch out for

Accepting a pack you do not understand. If it does not answer a question you actually have, say so and ask for it to be changed — it is your report.

Detail for its own sake. A one-page summary you read beats a forty-page pack you do not.

Where to get proper advice

Most accountancy firms and many bookkeepers offer this as a monthly service. It is worth asking what it would cost; owners routinely assume it is far more than it is.