Management Accounts vs Filed Accounts

I take a slightly bigger pinch of salt when considering management accounts as they in theory could be completely fabricated.  At least with statutory accounts, the directors have a legal obligation to ensure that they are true and fair etc.  But even then, most small companies are not subject to independent audit which is the only way you can get real comfort that the figures aren't mis-stated.  I was an auditor in a previous life and I still find it amazing that more than 50% of stat accounts I look at on FC and other platforms are non-compliant with relevant company law and UK accounting standards/GAAP - mostly in respect of disclosures, but it demonstrates that no one really polices what is put into the accounts.  

Some lenders fall into the trap of placing a lot of comfort that the stat accounts have been prepared by a firm of accountants.  Whilst the accountants may prepare the accounts, they are dependent on what they are told and the underlying records they are provided - they are under no obligation to verify or question whether the accounts are from error/omission, fair or correct, they merely prepare them based on the info given to them.

Going back to your original question of how management accounts later compare to later filed accounts, I have done this in the past and invariably the filed accounts are worse, usually because corporation tax hasn't been originally accounted for in the management accounts.

As a matter of transparency I think that FC should reformat the financial summary so that the profit before tax of management accounts is correctly labelled. (I work on the rule of thumb that you should take 20% off the bottom line of management accounts to account for corporation tax.)

(Is this why filed accounts are often so dreadfully late - the longer you put off filing the final accounts the longer you can put off paying corporation tax?)

I think it is just the case that on a monthly management account basis you generally don't bother accruing for tax (and a lot of other bits and pieces) otherwise it would be a major time burgle.  These accruals, including tax, are then calculated post year-end when preparing the formal accounts.  Of course, internally, management will be aware whether tax has or has not been accrued and reflect on the management accounts in this light.  The problem is when they just hand the management accounts to external parties who don't know whether tax has or has not been accounted for.  I don't believe there is any intention to deceive, it just comes down to figures the company uses to measure their own performance.  They themselves will be aware of tax liabilities relating to their current P&L (generally taxed at 20%) 

There is a similar thread on the ThinCats closed forum. After adjusting for tax I found roughly 10% of filed accounts had large differences in financial performance between the packs as provided and the filed accounts.

This thread is timely as there is an interesting case not yet disclosed by FC; it involves the reported placing into administration of a relatively large recent FC borrower (and another related company) where FC seemingly upgraded the risk band of the borrower by more than one notch on the back of new financial information being presented (the most visible change being that management accounts figures were added). It is only a single loan among many but I cannot recall another example of the underwriting decisions appearing to be so malleable. A sign of the times, perhaps?


This is in the public domain so any lack of acknowledgement/disclosure etc from the platform will become increasingly tenuous. I do hope that there is no return to some of the more questionable practices of the past where some borrower insolvencies were not being disclosed to the relevant FC lenders.


We’ll just have to wait for confirmation to see whether or not it is indeed egg on FaCe time.

14918 seems to fit the bill

Blimey, I'm in this one (£20)

Feel slightly sick reading the Telegraph splash that I ever lent a penny to this one. Anyway we're about to find out the value of that guarantee against the MD's property.

One default and now a RBR from Forfeited Capital !