Management Accounts
Management Accounts
Management Accounts are financial reports prepared for management of the company or to fulfil third party requirements which includes profit/loss ,balance sheet and cashflow forecast of the company on monthly, quarterly or yearly basis.
A good set of management accounts should serve 2 main purposes
- a) Timely and effective budgetary control: reporting on actual financial performance to date compared to budget to date.
- b) Reliable financial forecasting: projecting the forecast financial out-turn for the year, taking into account actual performance to date.
It is important to strike the right balance between these 2 objectives to ensure that there is sufficient accountability for actual performance to date, whilst at the same time looking forwards and informing corrective actions that may be necessary to achieve full-year targets and objectives.
Management Accounts
Key contents of monthly management accounts
- The surplus or deficit for the period, the financial year to date and the forecast for the end of the financial year (typically to include both operating performance and Earnings Before Interest, Taxation, Depreciation and Amortisation (EBITDA).
- An understanding of how the surpluses or deficits have been arrived at, how and why they vary from budgets and what may need to be done to bring the actual results in line with planned budget.
- The financial position at both month-end and as forecast for the year as a whole and whether its control of assets and liabilities, solvency and financial stability is satisfactory.
- The cash flow for the period, financial year to date, forecast for the remainder of the financial year and at least the next 12 months.
- Actual and forecast compliance with any loan covenants.
- Forecast financial health for the year-end.
- A schedule of planned and actual capital expenditure.
