1. Agree the reporting period, cut-off and responsibilities
Start with the month, entities and management decisions the pack must support. Identify the source ledger, comparative budget and who prepares, checks and approves the work. Keep the reporting perimeter consistent: a company report and a group report may require different records and adjustments.
Set a timetable around the information needed. Sales, purchasing, payroll, stock and project managers may supply inputs at different times. Record the cut-off, preparation deadline, review meeting and outstanding-item process. There is no universal number of working days that suits every SME.
Keep a dated trial balance or ledger snapshot before adjustments and retain the final version. A trial balance that balances only establishes that its debits and credits total equally; it does not show that every entry is complete, accurate or in the right period.
2. Reconcile bank accounts and material ledger balances
Reconcile each relevant bank and payment account to its statement at the reporting date. Investigate unmatched receipts, duplicated payments and older reconciling items. A bank-feed total or dashboard balance is not a substitute for understanding the differences.
Review control accounts such as payroll, VAT and other tax balances with the responsible advisers. Confirm what has been recorded and which returns, payments or adjustments remain outstanding. Use the accounting and tax treatment appropriate to the company; a management pack should not silently replace that work.
For each material reconciliation, retain the supporting schedule, preparer, review status and unresolved items. Avoid forcing a difference to zero with an unexplained journal. A visible issue with an owner is more useful than an apparently clean balance that nobody can support.
3. Review debtors, creditors, stock and work in progress
Reconcile aged customer and supplier schedules to the ledger. Inspect overdue, disputed and unusual balances, credit notes and relevant subsequent payments. Rising debtors can reflect growth, slower collection or a recognition issue; investigate before selecting an explanation.
Where stock or work in progress matters, obtain the relevant quantity, valuation and progress information. Identify slow-moving stock, delivery problems and estimates of project costs still to complete. An increase in work in progress should not be treated as better trading without supporting evidence.
Separate the accounting conclusion from the cash consequence. An invoice may belong in the period but remain uncollected. A supplier cost may be incurred even though the invoice has not arrived. Those differences are why both the financial position and the forward cash forecast need attention.
4. Post supported period-end adjustments
Review revenue and cost cut-off, accruals, prepayments, depreciation and other adjustments relevant to the business. Retain the evidence and calculation for each material entry, explain the accounting policy used and identify whether it reverses or rolls forward next month.
| Area | Preparation question | Evidence to retain |
|---|---|---|
| Accrual | Has a cost been incurred in this period but not yet recorded? | Service or delivery evidence, the estimate and future invoice follow-up. |
| Prepayment | Does a recorded expense relate partly to future periods? | Invoice, coverage dates and a release schedule. |
| Depreciation | Does the asset schedule reflect the relevant assets and policy? | Asset movements, calculation and review of significant changes. |
| Revenue cut-off | What activity or obligation supports recognition in this period? | Contract terms, delivery or performance evidence and the relevant accounting assessment. |
Do not adjust the accounts merely to achieve a planned margin. Estimates should be reasoned and labelled. Where evidence is incomplete or treatment is uncertain, discuss the issue with the appropriate accountant and explain its significance in the draft pack.
Worked example: a small net change can hide material adjustments
Consider an original hypothetical SME with draft operating profit of £25,000. Assume the applicable policies and supporting evidence justify all four adjustments below. Amounts exclude VAT and tax, and the illustration is not a set of instructions for posting entries to a real company.
| Item | Effect on profit | Running operating profit | Balance-sheet follow-through |
|---|---|---|---|
| Draft operating profit | Starting point | £25,000 | Retain the original trial balance. |
| Unrecorded £4,000 service cost incurred this month | −£4,000 | £21,000 | Record the relevant accrued liability and track the invoice. |
| £12,000 annual software service fully expensed; coverage starts this month | +£11,000 | £32,000 | Assume a £1,000 monthly expense and £11,000 remaining prepayment. |
| £2,000 depreciation not yet recorded | −£2,000 | £30,000 | Update accumulated depreciation and the asset schedule. |
| £6,000 valid advance invoice recognised as revenue for services next month | −£6,000 | £24,000 | Assume the invoice remains valid and the amount is deferred income under the applicable policy. |
The arithmetic is £25,000 − £4,000 + £11,000 − £2,000 − £6,000 = £24,000. The net reduction is only £1,000, but the absolute amounts of the four adjustments total £23,000. A small net movement therefore does not prove the draft was close enough to skip review.
None of these entries creates new bank cash when posted. The software payment may already have occurred, the accrued service cost may require a future payment and the advance invoice may still need collecting. Reconcile the resulting balances and update the cash view separately. See the connected balance-sheet and cash example for a complete teaching schedule.
5. Prepare connected statements and meaningful comparisons
Prepare the profit and loss account, balance sheet and actual cash information from the reviewed records. Reconcile the pack to the final trial balance and relevant supporting schedules. Add month and year-to-date comparisons where useful, using consistent definitions.
Keep the original budget distinct from the latest forecast. If the business is seasonal or has changed substantially, explain the limits of a simple prior-month comparison. A figure labelled favourable should reflect the economics: higher costs are not automatically positive because actual minus budget is a positive number.
Use the management accounts example pack and free CSV sample to see the outputs. This preparation guide explains the workflow behind them; the sample is illustrative and does not automatically prepare a company’s accounts.
6. Add KPIs and commentary that explain the result
Select operational measures that help explain trading or support a decision. Record each KPI’s definition, data source and owner. Where a financial KPI uses a different scope from the accounts, reconcile the difference rather than putting incompatible measures side by side.
Write commentary in three parts: the observation, the supported explanation or open question, and the next action. For example: ‘Debtors increased by £20,000. Finance will separate new sales from overdue invoices and obtain revised collection evidence before the next cash review.’ That states the issue without claiming a cause that has not been established.
Explain which findings change the forward view. Rising sales may require more stock, staff or debtor funding. Connect material commitments to the forecast rather than assuming the month’s profit equals cash available to spend. Read the monthly CFO review checklist for the questions management should ask.
7. Review, release and retain the reporting trail
A reviewer should challenge material balances, unusual journals and unexplained variances, not only spelling and presentation. Record adjustments made during review and check their effect across the pack. Confirm that the final narrative matches the numbers released.
Mark the pack draft or provisional where material work remains. State the issue, responsible person, expected resolution and possible effect. A provisional report may still help a time-sensitive discussion, but users need to understand its limitations before making the decision.
Save the final version, supporting records and management action log. Follow the agreed period-control process so later postings are identified and, where necessary, revised reports are reconciled to the released version. Keep the forecast update and any weekly cash routine connected to this reporting cycle.
Month-end preparation checklist
- Reporting period, entities, source version and responsibilities agreed.
- Bank and material control accounts reconciled; differences investigated.
- Debtors, creditors, stock and project balances supported as relevant.
- Cut-off and period adjustments documented, reviewed and tracked forward.
- Statements and KPIs reconciled to their agreed sources.
- Budget, prior-period and forecast comparisons clearly labelled.
- Commentary separates facts, assumptions and unresolved questions.
- Preparation and review status stated, with decisions and actions recorded.
Tailor the checklist to the company and the reporting purpose. If you need help with preparation, review or interpretation, discuss a management accounts and KPI reporting scope. Confirm what the existing bookkeeper, accountant and internal team will each provide before work begins.
Frequently asked questions
How do I prepare monthly management accounts?
Agree the period and responsibilities, reconcile the records, review material balances and post supported adjustments. Then prepare connected statements, comparisons, KPIs and commentary, obtain review and retain the reporting trail.
Can I prepare management accounts from bookkeeping software?
Software can provide a starting trial balance and reports. Reconciliations, period-end adjustments, reliable operational inputs and review are still needed. Agree the process and accounting policies for the company.
What is the difference between a trial balance and management accounts?
A trial balance lists ledger balances. A management pack selects, reconciles and explains information for decisions, with appropriate statements, comparisons, KPIs, commentary and visible limitations.
How many days after month-end should the pack be ready?
Agree a timetable reflecting the decisions, available records and review capacity. There is no single deadline appropriate to every SME. Identify provisional items and the plan to complete them.
What should I do if an invoice arrives after the pack is issued?
Consider the period, evidence, materiality and applicable policies with the responsible accountant. Follow the agreed correction process and explain any material revision rather than silently replacing the released figures.
Can Consult EFC review accounts prepared by our team?
Preparation, review and interpretation can be discussed as separate workstreams. Agree the records supplied, reconciliations, intended use and extent of the review before commissioning.
Professional context and further reading
This is general preparation guidance. The adjustment example is an original hypothetical illustration and is not a client case or a substitute for advice on the company’s accounting policies and records.
- British Business Bank: small business financial management
- ICAEW: business intelligence and management reporting
These resources provide background; they do not imply endorsement of an individual report or this website.
Connect preparation to the next decision
Tell us which part of the process needs attention and who currently prepares the records. We will discuss suitability, scope and fees before work begins. No confidential documents are needed to enquire.