Burlingham Financial ServicesA month-end close checklist for small businesses
Ten steps to close your books properly every month, in the right order.
Your statutory accounts tell you what happened last year. A management pack tells you what's happening now, in time to do something about it. Here's what a useful one contains, and how to read it.
Management accounts vs statutory accounts
Statutory accounts are prepared once a year to a legal format for Companies House and HMRC. Management accounts have no set format. They're produced monthly or quarterly for your own decisions, so they can show whatever helps you run the business, such as profit by product, cost per job or cash runway.
The core reports
- Profit and loss for the period and year to date. Ideally side by side with the same period last year and your budget.
- Balance sheet. A snapshot of what the business owns and owes: cash, debtors, stock, creditors, loans and VAT or PAYE liabilities.
- Cash flow summary. Where cash came from and went, because profit and cash are not the same thing.
- Aged debtors and creditors. Who owes you, who you owe, and how long each balance has been outstanding.
- Budget versus actual. The variance, both in pounds and as a percentage, shows where the plan and reality are drifting apart.
The measures that matter (KPIs)
Pick four to six measures that genuinely drive your business. Common ones include:
| Measure | How it's worked out | What it tells you |
|---|---|---|
| Gross margin | Gross profit ÷ sales × 100 | How much of each pound of sales is left after direct costs |
| Net margin | Net profit ÷ sales × 100 | How much is left after all overheads |
| Debtor days | Trade debtors ÷ sales × days in the period | How quickly customers pay you |
| Creditor days | Trade creditors ÷ purchases × days in the period | How quickly you pay suppliers |
| Cash runway | Cash available ÷ average monthly net outflow | How many months you could keep going |
| Overheads to sales | Overheads ÷ sales × 100 | Whether fixed costs are growing faster than income |
Commentary is what makes it useful
Numbers on their own rarely change behaviour. A good pack includes a page of plain-English commentary: what changed, why it changed and what needs a decision. For example: "Gross margin fell from 42% to 37% because supplier prices rose in August. Prices haven't been reviewed since January."
Monthly or quarterly?
Monthly suits businesses with tight cash, fast growth, stock or several staff. Quarterly works well for steadier businesses that still want a regular check-in. Either way, a pack is only as good as the books underneath it, which is why it should be built on reconciled, closed months.
Good to know: management accounts I prepare are for your internal use. If a bank, lender or investor asks for financial information, your accountant should prepare or review what's sent.
How I can help
I prepare management packs monthly or quarterly, with commentary and a review call to talk it through. Packs are built on books I've already reconciled, so you can trust the figures.
This article is general information, correct at the date it was last reviewed. It isn't tax or legal advice, so please speak to your accountant about your own circumstances.