How to prepare management accounts for a lender

Your filed accounts can be up to 21 months old by the time a lender sees them. If your business has changed since then, management accounts are how you show a lender where things stand today. Good management accounts can make the difference between a decline and an offer. This guide explains what to include.

What are management accounts?

Management accounts are internal financial reports prepared during the year, usually monthly or quarterly. Unlike statutory accounts, there is no fixed format and they do not need to be audited or filed. Lenders typically ask for them when your last filed accounts are more than six to nine months old, or when the business has grown, recovered or changed significantly.

What lenders want to see

At minimum, prepare:

• A profit and loss account: income, cost of sales, overheads and profit, ideally for the year to date and the same period last year.
• A balance sheet: what the business owns and owes at the date of the accounts, including cash, debtors, stock, creditors and loans.
• An aged debtor list: who owes you money and how long it has been outstanding.
• An aged creditor list: who you owe and how overdue those payments are.

If you can, add a short commentary explaining the numbers, and a cashflow forecast for the next 12 months.

Make them consistent

Lenders will compare your management accounts with your filed accounts and your bank statements. If the numbers do not line up, they will ask why.

• Use the same accounting policies as your year-end accounts.
• Make sure turnover is broadly consistent with the money coming into your bank account.
• Include all loans and finance agreements on the balance sheet.
• Show HMRC liabilities, including VAT, PAYE and Corporation Tax.

Keep them current

The most recent month should be as close to today as possible. Accounts that stop three months ago raise questions. Use your accounting software to produce them, and reconcile the bank first so the figures are accurate.

Explain anything unusual

A short note can save a lot of back and forth:

• One-off costs, such as a refit or legal case.
• Seasonal patterns.
• A big new contract or customer.
• Why profit has changed compared with last year.
• Director loans and how they are being repaid.

Lenders appreciate honesty. A clearly explained dip is far better than an unexplained one they find themselves.

Common mistakes

• Missing liabilities: leaving out a loan, advance or HMRC arrears. These usually show up in bank statements or credit checks, and omissions damage trust.
• Over-optimistic forecasts: projections should be realistic and based on evidence.
• Mixing personal and business costs: keep them separate.
• Unreconciled figures: totals that don't match the bank balance.
• No comparison period: without last year's figures, it is hard to judge progress.

Who should prepare them?

You can prepare them yourself with good accounting software, but many businesses ask their accountant or bookkeeper. Accounts prepared or reviewed by an accountant carry more weight with some lenders.

How they fit with the rest of your application

Lenders typically look at management accounts alongside your latest filed accounts, three to six months of business bank statements, and details of existing borrowing. Together they give a full, current picture.

A simple checklist before you send them

• The bank account is reconciled to the date of the accounts.
• Sales and costs are in the right month, not just when cash moved.
• VAT, PAYE and Corporation Tax liabilities are shown.
• Every loan, advance, lease and credit card is listed, with its balance.
• Director loan accounts are shown clearly.
• Year-to-date figures sit alongside the same period last year.
• A short note explains anything unusual.
• The file is a clear PDF or spreadsheet, labelled with the company name and period.

Sending accounts that pass this checklist saves time and shows the lender that the business is well run.

Next steps

If your filed accounts are old, prepare management accounts before you apply. Then run a quote and share your bank statements to get an indicative amount and rates. Figures are indicative only and subject to lender assessment and approval.