You may have heard the terms statutory and management accounts used frequently by your accountant, but what do they mean for your business? And why?
A statutory account report is prepared annually by limited companies.
To showcase your businesses financial actions taken within that year. It doesn’t go into every last detail but instead, gives an overview of your overall spending.
The statutory accounts are usually shared with shareholders and HMRC and generally contain:
- A profit and loss report to display turnover and profits
- A balance sheet references the total value of assets, capital gains and business credit
This report is mandatory for ALL limited company and HMRC will request them. They have to be prepared for a specific time and they offer an invaluable overview of business finance.
They can help to understand the day- to- day operations of your business, including all adjustments such as taxes, payroll and other deductions, at the end of the year.
Regarding management accounts, the clue is in the title!
These documents give an in-depth analysis of the financial position to the management team within the business. The management will be able to see sales trends or expenses, for example, to then make internal business decisions. Although not mandatory, they will give a true reflection of business financially and help make plans for the future.
Other reasons why a set of management accounts can be invaluable, including:
- Reviewing past performance
- Assisting in Budgeting, Forecasting and Planning
- Preparing to sell the business
- Attracting new investment
To get a better grip on your businesses financial management, contact our team today.