What should management accounts include?

At a minimum, a profit and loss for the month and year to date, a balance sheet and a cash position. A pack that serves a lender usually adds a cash flow, aged debtors and creditors, a comparison with budget and the prior year, a covenant calculation and a short commentary. The exact contents are set by the business and, where a facility requires them, by its information undertakings.

Are management accounts audited?

No. They are prepared in-house or by the company's accountant and are not independently tested, although a director or finance officer may be asked to confirm them to a lender. They need not follow an accounting standard in full, and commonly use estimates for stock, accruals and provisions. That is why a lender compares them with the next set of annual accounts and takes note of any difference.

How often should management accounts be prepared?

Monthly is common for businesses with bank facilities that are actively used, and quarterly for simpler or stronger borrowers, depending on what the facility letter requires. The useful measure is also how soon after period end they appear, since a late pack loses much of its value. The right frequency depends on how quickly the business's position can change.

Can a business get a loan on management accounts alone?

It depends on the lender and the loan, and smaller or asset-backed facilities may need less. Lenders generally want the most recent annual accounts too, because recent packs have not been tested and cannot show a full year's adjustments. A young business with no annual accounts yet may find that security, guarantees or a lower limit stand in for the missing history.

// WORKED EXAMPLEWHAT THE NUMBERS ARE FOR

Management Accounts: What a Lender Reads in Them

One pack says little. Three in a row start to talk.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-09 · 6 MIN READ

// THE SHORT ANSWER

A lender with a borrower's last annual accounts is looking at a business as it was. Management accounts close that gap: the monthly or quarterly figures a company prepares for its own directors, which a facility letter then requires it to share. Their value lies in sequence, because three packs show direction where one shows only a level. Their weakness is that nobody outside has tested them, and the balances needing most judgement, stock and accruals above all, are often estimated between year-ends. So a lender reads the trend, and then checks how closely the packs matched the audit.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// MAKE THE CALL

Issue 07 — Coastline Retail Group. NPAT up 9%. Operating cash flow down 31%. The dividend consent request is on your desk. Your call first, then the senior banker's.

Read the file →

PART OF Credit Analysis for Beginners

// 01 — WHY A LENDER WANTS THE UNAUDITED NUMBERS

Annual accounts are complete, prepared to a framework and late. By the time they arrive, the year they describe has been over for months, and a borrower's trouble can begin and mature in that time. A lender monitoring a working capital line or a quarterly covenant needs something closer to the present and accepts a less tested number to get it.

Management accounts are not a statutory document. Their form is whatever the business uses and its lender agrees, which is why the requirement lives in the information undertakings of the facility: what is to be delivered, how often, and how soon after period end. Many agreements add a statement that they are prepared on a basis consistent with the annual accounts, so that movements between packs mean something.

// 02 — WHAT A PACK CONTAINS, AND WHERE IT IS SOFT

Commonly in the pack What the lender does with it

Profit and loss, month and YTD margin against last year and against budget

Balance sheet debtors, stock, creditors, overdraft

Cash flow where the cash went

Aged debtors and creditors who is slow, and who is not being paid

Budget or forecast comparison whether the owner's forecasts hold

Covenant calculation headroom, on the agreement's definitions

Commentary whether management saw it first

The soft places are predictable. Stock is commonly rolled forward between counts, using a standard margin to estimate cost of sales. Accruals may be posted only for the items somebody remembers: supplier invoices not yet in, bonuses, customer rebates. Bad-debt and stock provisions are often reviewed once a year. Depreciation may be estimated. None of this makes the pack dishonest. It means that a monthly profit figure can be smoother than the business it describes, and the balance sheet and bank account, which are harder to estimate, are where the truth comes out first.

// 03 — THE EXAMPLE

A maker of adhesive labels for food packaging, constructed for this page like every figure in it, has a year ending 31 March and sends monthly packs. Here is the final quarter, in thousands of US dollars:

Jan Feb Mar

Revenue 2,400 2,350 2,420

Gross margin 31.0% 31.0% 31.0%

Debtor days 48 53 59

Stock 2,100 2,500 2,900

Overdraft used 1,100 1,400 1,800

Each month, taken alone, reads as an ordinary month. Together they do not. A margin that holds to a tenth of a point across three months suggests a percentage being applied, not one being measured. Stock has risen by US$800,000 on flat sales, and the overdraft by US$700,000. Debtor days are lengthening. The profit line says nothing has happened; the balance sheet says cash is going somewhere. The lender asks for a stock listing and a count date.

In April the company certifies its covenant on the March pack. In August the audit is signed:

EBITDA for the year, management accounts 3,200

Stock count: shortages and slow lines written down − 350

Supplier costs not accrued − 150

Volume rebate owed to a customer − 100

EBITDA for the year, audited 2,600

Net debt 9,100 covenant in this example: 3.25×

On management accounts: 9,100 ÷ 3,200 = 2.84× passes

On audited accounts: 9,100 ÷ 2,600 = 3.50× breach

The audit moved EBITDA by 19%, and the covenant went from a pass to a breach for a date four months gone. The covenant level belongs to the example and is no market norm. The lender now has a second question beside the breach: how much weight can next year's packs carry?

// 04 — HOW THEY DIFFER FROM THE YEAR-END ACCOUNTS

Annual accounts follow an accounting framework and a set format, and may be audited, reviewed or compiled, each giving a different level of comfort. Which of these applies depends on the company's size, its market and the facility. Management accounts follow only the company's own routine. They usually omit some notes altogether, including the related-party and contingent liability disclosures a lender would want. They are therefore read beside the accounts and do not replace them.

They also differ from a forecast, which is what management expects, and from a compliance certificate, which is a formal statement by the borrower that it has met the tests. A certificate is often built from management accounts, so an error in the pack can become an incorrect statement to the lender.

DEFINED IN ONE PARAGRAPH → · THE MONTHLY PACK → · AUDITED, REVIEWED OR COMPILED →

// 05 — WHERE THEY DECIDE A FILE

Three things in a pack can change a credit view before any number breaches anything. The first is when it arrives: a pack that has slipped is read as a signal in its own right. The second is the gap between the pack and the bank statements, since a lender running the account can see whether the reported cash and overdraft agree with what it holds. The third is the size and direction of the year-end true-up. A business whose audited profit lands close to its packs earns more reliance on them. One whose adjustments run the same way every year is telling the lender how to discount the next pack.

A borrower can do much of this work in advance: count stock at quarter ends, post accruals monthly, reconcile to the audit and show the reconciliation, and explain a poor month in the commentary. A lender near a difficult decision will often rely on the most recent packs, along with a cash forecast and the forecasts it has tested, because they are the most current evidence available.

HOW BANKS ASSESS MANAGEMENT → · THE COMPLIANCE CERTIFICATE →

// QUESTIONS PEOPLE ASK

What should management accounts include?: At a minimum, a profit and loss for the month and year to date, a balance sheet and a cash position. A pack that serves a lender usually adds a cash flow, aged debtors and creditors, a comparison with budget and the prior year, a covenant calculation and a short commentary. The exact contents are set by the business and, where a facility requires them, by its information undertakings.
Are management accounts audited?: No. They are prepared in-house or by the company's accountant and are not independently tested, although a director or finance officer may be asked to confirm them to a lender. They need not follow an accounting standard in full, and commonly use estimates for stock, accruals and provisions. That is why a lender compares them with the next set of annual accounts and takes note of any difference.
How often should management accounts be prepared?: Monthly is common for businesses with bank facilities that are actively used, and quarterly for simpler or stronger borrowers, depending on what the facility letter requires. The useful measure is also how soon after period end they appear, since a late pack loses much of its value. The right frequency depends on how quickly the business's position can change.
Can a business get a loan on management accounts alone?: It depends on the lender and the loan, and smaller or asset-backed facilities may need less. Lenders generally want the most recent annual accounts too, because recent packs have not been tested and cannot show a full year's adjustments. A young business with no annual accounts yet may find that security, guarantees or a lower limit stand in for the missing history.

// NEXT TO IT

// ON WHOSE DESK

The seats that read this term in an ordinary week. Each page says what the seat is for, who arrives in it, and the shape of the round it runs.

Transaction bankerSells and structures the plumbing a business runs on — accounts, payments, collections, liquidity and trade finance.
Personal bankerThe bank's face in a branch or on a phone: everyday accounts, cards, personal lending and the first conversation about a home loan.
Operations analystRuns the processing every product depends on — payments, onboarding, settlements, servicing — at volume.

THE IN-TRAY · ONE MINUTE

Make the call on one file.

A short file on the ground this page covers. Every option opens with how far it sits from a senior banker’s read.

THE FIRST QUESTION · THE BORROWER · EARNINGS

A travel agent now reports only its commission as revenue, instead of the full price of the holidays it sells. Revenue fell from US$80m to US$12m; profit is unchanged.

What happened to the business?

6 MORE ON THE BORROWER · EARNINGS →WHERE DO YOU READ FROM? THE PLACEMENT →

THE READING ROOMIN ONE PARAGRAPHManagement accounts What are management accounts, and why does a bank want them?