Management accounts – what are lenders looking for?

Management accounts summarise the financial data in your business. Compiled regularly – typically monthly – these generally comprise a profit and loss statement, and may also include a balance sheet and/or cash flow statement. They are used specifically to help management make sound financial decisions about the business by using up-to-date information, not relying on historic year-end accounts or bank balance movements. 

An up-to-date set of management accounts has become increasingly necessary when you want to obtain funding. Lenders will need them to assess your business – they’ll be looking for consistency of performance, assets versus liabilities, and your income and expenses. They will also take note of any large variances and will want an explanation of them.

With good quality management reporting, production of relatively current year-to-date reports are now a standard lending requirement rather than a ‘nice to have’. Particularly when your business is growing or undergoing some other form of change. Lenders want to know how you performed last month, not just to the end of your last financial year. 

So even if you don’t need funds now, by maintaining regular management accounts, you’ll have the necessary data the funders want to hand when you do need finance – saving a huge amount of time and effort. Fortunately, these reports are much easier to produce than they were some years ago.

Maintaining up-to-date management accounts simply makes good business sense. Regardless of whether you are looking for funds or not, the whole point of them is to provide you with the key financial and statistical information you need to make day-to-day and short-term decisions.