Ask most business owners or managers, ‘What are management accounts?’ and you may often get a hesitant answer. While they may have heard the term thrown around during board meetings or by accountants, the real detail often gets lost. Yet management accounts are vital tools for businesses of every size, and not just for financial reporting.

Here at Williamson & Croft, we have a skilled and experienced team that delivers our accounting services. So we fully understand how a good management account example can shape strategy, monitor growth, and catch potential issues before they become serious problems.

In this guide, we’ll break down exactly what management accounts are, who uses them, and why they’re more important than many businesses realise. We’ll also walk you through what to include, how to prepare them, and share a clear management accounts example to make things easier to visualise. Whether you’re a director, financial controller, or business owner, this is your practical roadmap to understanding and leveraging management accounts effectively.

What are management accounts?

Management accounts are internal financial reports that provide a detailed, up-to-date view of a company’s performance. These are usually produced monthly or quarterly. They aren’t legally required, unlike your statutory accounts, which is perhaps a big reason why not everyone is completely aware of how crucial it can be.

Typically, management accounts include a:

balance sheet
cash flow statement
profit and loss account (P&L)
short commentary or summary highlighting key issues or trends

They give you real-time insight into how your business is doing, allowing for faster and smarter decisions. Whether it’s spotting cash flow problems early, identifying underperforming products, or tracking progress against your targets, management accounts help you stay firmly in control.

Who uses management accounts?

Management accounts aren’t just for accountants or tax specialists. They’re used by a wide range of stakeholders to assess a company’s financial position and prospects, including:

Owners and managers: To monitor performance and guide daily decision making
Investors: To assess return on investment and spot growth opportunities
Banks and lenders: To evaluate creditworthiness and loan risks
Invoice discounting and factoring providers: To assess debtor performance
Accountants: To assist with strategic tax planning
Tax planners: To forecast liabilities and optimise claims

Why are they important?

So far, we’ve explained the basics – now let’s deal with the why. If you want your business to grow sustainably, you need regular and accurate information. This is exactly why management accounts are so important.

Management accounts provide:

insight into income and expenditure trends
visibility over cash flow and liquidity risks
early warnings about financial pressures or opportunities
data to inform better strategic decisions
metrics to benchmark your business against industry standards
evidence to secure funding, negotiate better terms, or attract investors

They allow you to see not just where your business is today, but where it’s heading. Running a company without management accounts is like navigating a ship without charts or sails. You may stay afloat for a while, but you’re unlikely to reach your destination safely or anytime quickly.

How are management accounts produced?

The quality of your management accounts depends entirely on the quality of your underlying data. Good management accounts start with a sound accounting system.

Choose the right system: Cloud accounting software like Xero, QuickBooks, or Sage makes it easy to generate reports automatically. For very small businesses, Microsoft Excel can work, but only if you build a robust reconciliation process.
Ensure your data is clean: All bank accounts should be reconciled monthly. VAT returns, PAYE, and sales/purchase ledgers must be up to date and accurate. Stock values, work in progress, accruals, and prepayments should be correctly recorded.
Prepare regular reports: Design templates that match your key metrics. You can use automated dashboards where possible for real time tracking.

What skills are required to manage accounts?

Producing meaningful management accounts requires a blend of bookkeeping accuracy and financial interpretation skills. It’s critical to recruit experienced, detail oriented staff or outsource to a reputable professional team. Poor quality management accounts can be worse than none at all.

Essential skills include:

Bank reconciliation: Always ensure cash balances match statements
VAT and PAYE reconciliation: Avoid missing liabilities that could impact your results
Sales and purchase ledger management: Knowing exactly what’s owed and what’s due
Accruals and prepayments: Adjusting profits for timing differences
Depreciation management: Spreading the cost of assets correctly over time
Analytical ability: Being able to spot trends, outliers and patterns in financial data

What do management accounts look like?

Management accounts can vary significantly based on business size, sector, and reporting needs. However, most good reports include:

P&L statement: Clear breakdown of income, direct costs, gross profit, overheads, and net profit
Balance sheet: Assets, liabilities, and equity snapshot
Cash flow statement: Cash inflows and outflows over the reporting period
Executive summary: A high-level summary highlighting successes, challenges, and trends
KPIs: Key performance indicators like gross margin percentage and stock turnover

Other additions may include sector analysis, budget vs actual comparisons, and year-on-year comparisons

How often are they prepared?

There’s no strict rule on how often management accounts must be produced, but most businesses choose to prepare them either monthly or quarterly. Regular reporting ensures business owners and management teams have consistent visibility over their financial performance. This helps them make informed decisions and respond quickly to any emerging issues.

How to prepare management accounts

1. Gather data

Start with reliable, up-to-date information from your accounting systems. Automation tools like integrated CRM and ERP systems can improve data gathering. Missing or incomplete records can lead to inaccurate accounts, giving you a misleading picture of your business performance. Start by ensuring all transactions are captured within your accounting system for the period you’re reporting on.

You should ensure:

all transactions are recorded
bank reconciliations are complete
ledgers are accurate

This includes:

sales invoices
purchase invoices
bank statements
payroll records
petty cash logs
loan and finance agreements
VAT returns

2. Ensure everything is accurate

Cross check everything and use audit trails to track any adjustments. Accurate data provides a solid foundation for reliable financial reports, helping you avoid nasty surprises later. This may include unexpected tax bills or cash shortfalls.

You should:

compare bank statements to your cashbook
verify VAT and PAYE balances
validate sales and purchase records against supporting documents

3. Produce financial statements

Once your financial data is clean and complete, it’s time to produce the core statements. These reports provide an all-round financial view of your business. They help you spot whether you’re growing sustainably, building cash reserves, or heading towards financial strain.

These should include a:

P&L: Summarises income, direct costs, overheads and net profit or loss over the reporting period
Balance sheet: Shows your company’s financial position at a point in time, including what its assets and liabilities
Cash flow statement: Tracks the movement of cash in and out of the business, highlighting liquidity status.

4. Incorporate operational metrics

Financial numbers alone don’t tell the full story. Add KPIs that reflect on operational performance to contextualise the financials.

This should include:

sales growth
cost per acquisition
customer churn rates
inventory turnover

5. Prepare an executive summary

This crucial step is often overlooked. Senior management rarely have time to dive into every number, so a clear executive summary brings out the headlines. This turns data into actionable insight and helps directors or decision makers quickly grasp the situation and prioritise actions.

Write a concise summary in plain English that covers:

key financial results
notable trends
risks or opportunities
actionable recommendations

6. Analysis and interpretation

If you analyse and interpret your data accurately, you can turn numbers into insights and increased performance.

You should consider:

Trend analysis: Examine results over several months to spot patterns in revenue, expenses, cashflow, and profitability
Variance analysis: Compare actual results against budgets, forecasts, or previous periods to identify trends
Sector by sector breakdowns: If you work in a large organisation, then analysing be sector can also be helpful
Cost analysis: Dig into expenses to identify areas for savings or efficiency gains.

7. Share your insights with key stakeholders

Management accounts are only useful if stakeholders understand and act on them. To do this, you need to make sure they are all on the same page. Analysis and interpretation turns raw numbers into business intelligence, helping guide strategic decision making.

You can:

hold regular financial review meetings
use charts and dashboards
provide recommendations alongside the data

A management accounts example

Here’s a simplified management accounts example for a small services business:

Category	March 2025
Revenue	£100,000
Cost of Sales	£40,000
Gross Profit	£60,000
Overheads	£35,000
Operating Profit	£25,000
Finance Costs	£2,000
Net Profit Before Tax	£23,000

Balance Sheet Snapshot

Assets: £250,000
Liabilities: £120,000
Equity: £130,000

Cash Position

Opening Cash: £20,000
Cash Inflows: £90,000
Cash Outflows: £75,000
Closing Cash: £35,000

Key KPIs

Gross Margin: 60%
Overhead Ratio: 35%
Debtor Days: 45
Creditor Days: 30

Why do so few businesses have management accounts?

Despite the clear benefits, many UK businesses still don’t produce regular management accounts.

Common reasons include:

lack of interest or understanding
believe the business is too small
fear of complexity
absence of a formal accounting system
concerns about cost
time pressures

However, even small businesses with turnovers of £100,000+ can hugely benefit from simple quarterly reporting. The key is to tailor your management accounts to the size and needs of your business. They don’t have to be complicated to be incredibly valuable, either!

How management accounts can be used outside of the business

Management accounts aren’t just useful internally, they can be powerful tools when dealing with external stakeholders too.

Impress lenders: Banks and lenders value accurate, up-to-date information. Regularly sharing management accounts, even when the news isn’t positive, builds trust. Include a clear commentary and a plan of action alongside any weaker figures to set you apart from businesses that don’t report regularly. This transparency can significantly improve your chances of securing finance and negotiating better interest rates in the future.
Report to investors: Investors want reassurance that the business is performing and that their investment is protected. Regular management accounts are often expected and always appreciated. This builds confidence and maintains good relations.
Support factoring or invoice discounting providers: If you use invoice financing, providing regular management accounts can help maintain your facility and even improve terms.
Enable accountants and financial advisors to help: Sharing management accounts with your accountants enables them to give better advice, spot opportunities for improvement, and optimise financial strategies.
Assist with tax planning: Up to date accounts allow your accountants to plan more efficiently for corporation tax, VAT, and other obligations.
Secure better financial deals: Management accounts provide the evidence lenders and investors need to offer higher facilities, better terms, and lower borrowing costs.

Contact Williamson & Croft for more advice

Here at Williamson & Croft, we specialise in helping businesses of all sizes unlock the full power of management accounting. Whether you’re starting from scratch, looking to refine your reporting, or need more strategic financial insights, our expert team is here to help.

Email info@williamsoncroft.co.uk for more information, or alternatively, you can call us on 0161 399 0121 or 0151 303 3112. We have offices based in both Manchester and Liverpool, if you’d like to come pay us a visit, or simply send us a message on our contact us page.If you liked this blog you may also enjoy reading – 5 Signs It’s Time to Switch Accountants.

Previous Next

What Are Management Accounts (And What to Include in One)