As a business owner, you are aware of the necessity to produce accounts for your company. However, it is crucial to understand the disparity between statutory accounts and management accounts, as they serve different purposes. Maintaining both types of accounts are considered good practice for businesses seeking to gain a comprehensive understanding of their financial status.
What are statutory accounts?
Statutory accounts are obligatory for companies or limited partnerships. They are the annual accounts that you are legally required to produce, submit, and file as a company. Therefore, statutory accounts are primarily a regulatory requirement. As a business owner and company director, it is your responsibility to ensure that these accounts are prepared accurately and filed on time.
Statutory accounts typically include the following:
Directors' report:
This report provides an overview of the company's business strategy, performance, key achievements, and its overall financial position. It also covers shareholder information, dividends, and other pertinent information about the company.
Profit and loss statement (P&L):
The P&L statement outlines the business's income and expenditure throughout the preceding year. It is a significant indicator of the company's profitability during that period.
Balance sheet:
The balance sheet presents a snapshot of the company's assets, equity, and liabilities at a specific point in time. It reflects the financial health of the company on the date the accounts are prepared and serves as a valuable report for lenders and investors to assess.
Cash flow statement:
This statement illustrates the inflows and outflows of cash over the accounting period. Ideally, the inflows should exceed the outflows, indicating a positive cash flow position.
Notes to the Financial Statements:
These notes provide supplementary details about accounting policies, significant estimates, disclosures, and other relevant information essential for a comprehensive understanding of the financial statements.
What are management accounts?
In contrast to statutory accounts, management accounts are not legally required but are still highly recommended for any growing business.
Management accounts are produced to help you and your top team stay informed about the business's financial performance. Generally, they provide a summary of the most important financial information and are generated on a monthly or quarterly basis, depending on the needs of your business. These accounts encompass a combination of numbers, data, and metrics, which serve as a basis for informed decision-making.
A typical management information pack may include:
Sales performance and analysis
Financial statements (profit and loss, balance sheet, cash flow statements, etc.)
Key performance indicators (KPIs) tracking
Budget versus actual comparisons
Inventory and stock levels
Customer and supplier analysis
Cash flow forecasts for the upcoming period
Operational metrics related to production and delivery
Project updates regarding major jobs
Management commentary and insights.
By having access to both statutory and management accounts, you can gain a comprehensive overview of your company's past, present, and future performance. Filing statutory accounts ensures compliance with legal requirements, while the in-depth analysis provided by management accounts empowers you to make well-informed business decisions.
If you require assistance with your accounting needs, please feel free to consult us.
Kommentare