Question 1

What are management accounts, and how are they different from statutory accounts?

Accepted Answer

**Statutory accounts** are prepared to a legal standard, once a year, for filing and for tax. **Management accounts** are prepared for you, as often as you need them, in whatever form actually helps you decide things. The first is compliance; the second is the one that runs the business.

**Statutory accounts:**

**Prescribed format**, following accounting standards.

**Annual**, and filed months after the period ends — **which is the fundamental problem: by the time they arrive, they describe a situation you can no longer influence.**

**Aggregated**, showing the business as a whole rather than by product, customer or channel.

**Backward-looking and legally required.**

**Management accounts:**

**Monthly or quarterly**, produced within days of period end.

**Any format you choose**, including the breakdowns that matter — by product line, site, customer segment or project.

**Comparative**, showing actual against budget and against the same period last year, with variances explained.

**Including non-financial measures** where they drive the numbers — utilisation, conversion, headcount, pipeline.

**Forward-looking**, with a cash flow forecast alongside, which is frequently the most valuable page.

**What they should actually contain:** a profit and loss with variance to budget, a balance sheet, a **cash flow forecast** covering the next 13 weeks at minimum, debtor and creditor ageing, and a short commentary explaining what changed and why.

**Why the commentary matters.** Numbers without explanation invite everyone to invent their own story. A paragraph naming the two things that moved is worth more than another schedule.

**The practices that make them useful:**

**Consistency of treatment**, so months are comparable.

**Accruals and prepayments applied**, or a month with an annual invoice in it looks catastrophic.

**Timeliness over precision.** Accounts that are roughly right within a week beat exact figures after six — **decisions are made on the early ones regardless.**

**Comparing to something**, since a figure alone means nothing.

**Lenders and investors frequently require them**, and the ability to produce them quickly is itself taken as a signal about the business.

General information, not financial advice.

Question 2

What do the three financial statements actually tell you?

Accepted Answer

Each answers a different question, and reading any one alone gives a misleading picture — which is exactly why there are three. The profit and loss account (income statement). Did we make money over

Question 3

Why do you need a separate business bank account?

Accepted Answer

For limited companies it is effectively a necessity because the company's money is legally not yours. For sole traders it is not usually a legal requirement and is still the single highest-return

Question 4

What is the difference between cash and accrual accounting?

Accepted Answer

When a transaction is recorded. Cash accounting records it when money moves; accrual accounting records it when the economic event happens, regardless of payment. Cash basis. Income is recorded when

Question 5

What is the difference between a bookkeeper, an accountant and an auditor?

Accepted Answer

Three distinct roles that differ in what they produce, what qualifications they need, and — crucially — who they are working for. The third distinction is the one that surprises people. A bookkeeper

Question 6

What records must a business keep, and for how long?

Accepted Answer

Enough to support every figure in your accounts and tax returns, kept for a statutory minimum period that varies by record type and jurisdiction — and the burden of proof is on you, not on the

Question 7

What is the difference between revenue, profit and cash flow?

Accepted Answer

They measure three different things, and a business can be strong on one while failing on another — which is why profitable companies go bust. Revenue (turnover). The total value of sales in a

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