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Management information

Management accounts: turning financial information into better decisions

Annual accounts tell you what happened last year, for the record. Management accounts tell you where the business stands now, so you can act.

2 min readNomic & Co.

What management accounts are

Management accounts are reports prepared for the people running the business. Unlike the formal annual accounts, which a company files for statutory purposes (see GOV.UK: prepare and file annual accounts for a limited company), they have no fixed format. Their value is in being current, clear and shaped around your decisions.

What a useful set contains

  • Profit and loss for the period, compared with the previous period or with a plan.
  • A balance sheet, showing what the business owns and owes.
  • Cash position, and how it moved.
  • A few measures that matter to you, such as margin on a product line or the amount owed by customers.
  • Short commentary, saying what changed and why, in plain language.

How often you receive them, and what goes in, is a decision for your business. More is not better. Fewer, clearer measures are used more.

A worked example

A trade supplier sees total sales rising each month and assumes the business is doing well. The management accounts break the figures down: one product line has a thin margin, and its growth is pulling the overall margin down. Without that breakdown the decision to push that line harder would have looked obviously right.

Questions your accounts should help answer

  1. Are we making money on what we sell, or only on the total?
  2. What changed since last period, and do we understand why?
  3. What do we owe, and what are we owed?
  4. What would we do differently if these figures continue?

They are only as good as the records

Management accounts rely on bookkeeping that is complete and current. The official guidance on GOV.UK: company and accounting records sets out what must be kept. If the records are late or incomplete, the reports will be too, however well designed. That is why reliable records come first, then clear reporting.

A practical test: if a report would not change a decision, a conversation or a plan, ask whether it needs to be there. The best set is the shortest one that you read, understand and use.

Make it a habit

Set a regular time to read the figures with whoever prepares them. Ask what surprised them, and what they would watch next. Over a few cycles, you learn which numbers matter to your business, and the reports can be trimmed to match.

Next step

Interested in management accounts for your business?

If a guide raises a question about your own situation, tell us about the business and we will say plainly whether we can help.

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