Do you know the difference between your statutory accounts and your management accounts? We’re highlighting the main points of each and explaining why both are equally important for your business.
As a business owner, you know you need to produce accounts – that’s a given. But do you know the difference between statutory accounts and management accounts?
Your statutory and management accounts have two quite separate purposes, and producing both kinds is good practice for any business that wants a handle on its numbers.
Let’s take a look at the key differences and why you need these specific kinds of accounting.
1. What are statutory accounts?
Statutory accounts are a legal requirement for any limited company or partnership. They’re the mandatory annual accounts you MUST produce, submit, and file as a company. As such, statutory accounts are a regulatory requirement. You and your fellow company directors are responsible for ensuring these accounts are filed on time and in full.
Your statutory accounts will typically include:
- Directors’ report– giving an overview of business strategy and performance, key achievements and the organisation’s overall financial position. It will also cover shareholder information and dividends alongside broader insights about the company.
- Profit and loss statement (P&L) – outlining the revenue coming into the business and the expenditure going out during the annual period. This is a critical indicator of the business’ profitability during the preceding year.
- Balance sheet – giving a snapshot of business assets, equity, and liabilities. This is an indication of the financial health of the company on the date that the accounts are produced and a useful report for lenders and investors to review.
- Cashflow statement – showing your cash inflows and outflows throughout the period. In an ideal scenario, you want your inflows to outweigh your outflows. This is known as being in a positive cashflow position.
- Notes to the Financial Statements – containing supplementary details on your accounting policies, significant estimates, disclosures, and other relevant information for a comprehensive understanding of the financial statements.
2. What are management accounts?
Unlike statutory accounts, management accounts are not a mandatory legal requirement. But, producing management accounts is still good practice for any growing business.
Management accounts keep you and your top team apprised of what’s occurring in the business and how you’re tracking. They will generally summarise the most important financial information, and be run monthly or quarterly, depending on your business. This mix of numbers, data and metrics can then help inform your business thinking and decision-making process.
A regular management information pack will include:
- Sales performance and analysis
- Financial statements (profit and loss, balance sheet, cashflow statements, etc)
- Key performance indicators (KPIs) tracking
- Budget versus actual comparisons
- Inventory and stock levels
- Customer and supplier analysis
- Cashflow forecasts for the upcoming period
- Operational metrics regarding your production and delivery
- Project updates for your main jobs
- Management commentary and insights
Pathfinder Solutions can help you with all your accounting needs
Having statutory and management accounts at your fingertips gives you the best possible overview of your company’s past, present, and future performance.
Filing statutory accounts keeps you compliant with the law. Comprehensive management accounts provide meaningful data and evidence for making properly informed business decisions, potentially giving you a vital competitive edge.
We’ll help you produce your statutory accounts and tick all the compliance boxes. And we’ll also generate tailored management accounts to keep you on the ball with your numbers
About Pathfinder Solutions
Pathfinder Solutions advisory team members have either owned or managed businesses, or are investors themselves, so we know first-hand the challenges you face in your world.
Sure we’re Accountants, but the best solutions in business come from focusing on more than just the numbers. Our real-world business experience delivers just that.
