Monthly management accounts are the reports you use to run the business: what you earned, what you spent, what you owe and how much cash you have. Unlike year-end statements prepared for tax, they are built for decisions, so they need to arrive quickly and be easy to read.
Key takeaways
- A basic pack includes a profit and loss, balance sheet, cash summary and aging reports.
- Comparisons with last month, last year or budget make the numbers useful.
- A short written commentary explains the main changes so you don't have to work them out.
- Reports are only as good as the month-end close behind them, including reconciliations and accruals.
- Agree a fixed delivery date each month and keep the format consistent.
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What are monthly management accounts?
They are internal financial reports prepared each month for owners and managers. They show performance and financial position for the month and year to date, often with comparisons and notes. They are not filed with anyone, so you can shape them around the questions you actually ask about your business.
What a typical pack includes
- Profit and loss for the month and year to date, with comparison columns.
- Balance sheet at month end.
- Cash summary: opening cash, money in, money out and closing cash.
- Accounts receivable and accounts payable aging.
- Key figures you track, such as gross margin or revenue by product or channel.
- A one-page commentary on what changed and why.
How an offshore team prepares them
- Close the month: reconcile every account and post accruals, prepayments and depreciation.
- Review balances for anything unusual.
- Produce the reports from your accounting system in an agreed format.
- Write the commentary and list questions for you.
- Deliver by an agreed business day each month.
The time difference with India can shorten this, as described in our post on the time zone advantage.
Ask us for a sample report layout
Reading your reports
Start with the commentary, then check cash, then gross margin. Compare with last month and last year to spot trends. Use the aging reports to see who owes you and what you need to pay. If you use NetSuite, our post on NetSuite financial statements explains how to customize the layout. For startups preparing investor updates, see outsourced accounting for startups. Our financial reporting service covers management packs.
Writing a useful commentary
The commentary is the part of the pack most owners actually read, so it should be short and specific. A good one answers four questions in plain sentences:
- How did revenue and gross margin compare with last month and the same month last year?
- Which expenses moved the most, and why?
- What happened to cash, and what large payments or receipts are coming up?
- Is there anything you need to decide or approve?
Ask your accountant to name the cause of each large change, such as a one-off purchase, a delayed invoice or a new hire.
Choosing the figures to track
Pick a small set of figures that reflect how your business makes money and keep them the same every month. A services firm might track billable hours and revenue per client. An online seller might track orders, average order value and fees as a share of sales. A distributor might track gross margin by product line and days of inventory. Consistent figures make trends obvious.
Frequently asked questions
What is the difference between management accounts and financial statements?
Management accounts are internal reports prepared monthly for decision-making. Financial statements are formal reports, usually prepared annually, for tax, lenders or investors, following accounting standards.
How soon after month end should management accounts arrive?
That depends on how quickly statements and documents are available. Agree a fixed business day each month so you know when to expect them.
Can management accounts include a budget comparison?
Yes. Once a budget is entered in your accounting system, budget and variance columns can be added to the monthly reports.
Do management accounts need accruals?
They are much more useful with them. Accruals and prepayments put costs and income in the month they relate to, so one month's results aren't distorted by when bills happened to be paid.
Get monthly reporting from Oakridge Global
Our accountants close your books and prepare a clear reporting pack every month. Schedule a consultation with Oakridge Global to agree the reports you need.