Plenty of owners run a good business on a feel for the numbers. You know roughly what came in last month and how much is in the bank. Your accountant does the year end, and you see the full picture once a year, a few months after it's over.
That works while you own the business. It gets harder when a buyer arrives, because the first thing they'll ask for, after the last three years of accounts, is how the business is doing this year. That's what management accounts are for.
What management accounts are
Management accounts are the figures you prepare for yourself, usually every month. They normally include a profit and loss account for the month and the year to date. Most also have a balance sheet and a summary of cash, and compare each figure with a budget and with the same period last year, so you can see what's changed and why.
There's no legal requirement to produce them, and no set format. A company does have to keep adequate accounting records, though. Under the Companies Act 2006, those records must be good enough to show the company's financial position with reasonable accuracy at any time. Regular management accounts are the simplest way to show that you can.
How they differ from statutory accounts
Statutory accounts are the annual accounts your company must prepare by law and file at Companies House. Your shareholders and HMRC get the full version. The two sets of figures do different jobs.
| What differs | Statutory accounts | Management accounts |
|---|---|---|
| Who they're for | Shareholders, HMRC, Companies House and the public record | You and anyone you choose to share them with |
| How often | Once a year | Usually monthly, sometimes quarterly |
| When | A private company has nine months after its year end to file | As soon after the month end as you can produce them |
| Format | Set by company law and accounting standards | Whatever helps you run the business |
| Detail | The company as a whole, often in summary | As much detail as you want, by site, product or team |
Why the filed accounts often tell a buyer little
A private company must file its accounts at Companies House within nine months of its year end, or 21 months from registration for its first accounts. Take a company with a 31 March year end that files on the deadline. In October 2026, its latest filed accounts could still be for the year to 31 March 2025, a year that ended more than 18 months earlier.
What's on the public record may be thin as well. A small company, meaning one with any two of a turnover of £15,000,000 or less, £7,500,000 or less on its balance sheet and 50 employees or fewer, can choose not to send its profit and loss account to Companies House. A micro-entity can send just a simplified balance sheet. A small company can usually skip an audit too.
That's changing. Companies House announced on 9 June 2026 that from April 2028 small companies and micro-entities will have to file a profit and loss account, though they'll be able to opt out of it being published. The option to file abridged accounts will go, and all accounts will have to be filed using commercial software.
A buyer will see your full statutory accounts in any case, because you'll give them a copy. They'll still need something more recent.
Why buyers ask for management accounts
A buyer is paying for the profit the business will make under them. The best evidence of that is how it's trading now, so management accounts end up doing several jobs in a sale.
- Current trading. Whether this year is ahead of last year or behind it, and whether the trend is steady.
- The latest 12 months. Buyers usually price on the most recent 12 months of profit, not on your last year end. That figure comes from management accounts.
- Adjustments. One-off costs and personal costs are easier to find and prove month by month. These feed into the adjusted profit, or EBITDA, that sets the price.
- Seasonality. Monthly figures show when the business earns its money and when cash is tight, which matters for the timing of completion.
They also say something about you. A business that can produce clear monthly figures within a few weeks of the month end looks well run, and buyers find it easier to trust its numbers.
What a buyer looks for in them
During due diligence, the buyer's accountants will usually ask for monthly management accounts for the last two or three years and the current year to date. These are the things they tend to check.
- A full set each month. Profit and loss, balance sheet and cash, not just sales and the bank balance.
- Month-end adjustments. Whether costs are recorded in the month they relate to, with depreciation, stock and accruals for things like bonuses and holiday pay posted monthly. Without them, some months look better than they were.
- Gross margin. Whether it holds steady, and if it moves, whether there's a reason you can explain.
- The balance sheet. How much customers owe and how long they take to pay, what you owe suppliers, VAT and PAYE due, and any director's loan account.
- Consistency. Costs coded to the same headings year after year, so trends mean something.
- Owner and one-off costs. Shown separately, so they can be adjusted for openly.
Reconciling to the year end
This is the check that catches many businesses out. When the buyer adds up 12 months of your management accounts, they should get close to the profit in your statutory accounts for the same year. Often they don't, because your accountant makes adjustments at the year end that never went back into the monthly figures.
As a made-up example, a company's management accounts show a profit of £220,000 for the year. The statutory accounts show £185,000. The £35,000 gap is made up of a stock count that came in £20,000 lower than the books, a £10,000 accrual for bonuses and holiday pay, and £5,000 of depreciation that was only posted at the year end.
None of that is unusual. But if nobody can explain the gap, a buyer will start to wonder which figure to believe, and will lean towards the lower one. Ask your accountant for a reconciliation, sometimes called a bridge, for each of the last three years, and post the year end adjustments back into the monthly figures.
The measures buyers expect in your sector
Buyers usually want a few figures beyond profit as well, the ones that show what drives the business. Which ones depends on what you do.
| Business | What buyers often ask to see by month |
|---|---|
| Day nursery | Occupancy by room, funded and paid hours, staff costs as a share of income |
| Care home | Occupancy, the mix of council and private fees, agency staff costs |
| Accountants and other professional firms | Recurring fees, work in progress and how long clients take to pay |
| Building and trades | Order book, margin by job, retentions held by customers |
| Shops, cafés and restaurants | Weekly sales, gross margin, wages as a share of sales |
| Contract or subscription businesses | Recurring income, customers lost and won, contract renewal dates |
Pick the handful that you'd look at yourself to judge a month, and report them the same way every time. A buyer will trust a measure you've tracked for two years far more than one put together for the sale.
Getting them right a year before you sell
Management accounts are most useful to a buyer when there's a long, consistent run of them. If you don't produce them now, or they're rough, a year or more before a sale is a good time to start. Our guide to preparing a business for sale covers the rest of that work.
- Agree a monthly timetable with your bookkeeper or accountant, and keep to it.
- Post depreciation, stock and the main accruals every month, not just at the year end.
- Take personal costs out of the business, or code them separately.
- Set a budget for the year, so each month has something to be compared with.
- Reconcile the last three years to your statutory accounts.
- Keep the bank, VAT and payroll records reconciled to the accounts each month.
Keep producing them during the sale. The buyer will ask for each month's figures until completion, and a sudden gap, or a weak month nobody can explain, is the kind of thing that reopens the price.