Management Accounts do not necessarily have to be prepared unless they have been specifically requested by a third party e.g. if the business takes out a loan it may be a condition of the loan that Management Accounts are prepared periodically.
Although not compulsory, there are many benefits in preparing Management Accounts. One of the main benefits being that it will allow you to monitor the financial performance of the business.
If the business is doing well then up to date financial information will allow calculation of expected tax liabilities. This in turn will allow tax planning with a view to reducing such liabilities.
If the business is not doing well then up to date financial information will allow early decisions to be made to change and rectify matters.
So, if businesses do not have regular up to date information (such as the information prepared by Management Accounts) and instead relies on information produced from Annual Accounts then unnecessary taxes could be paid OR decisions are taken too late to stem losses.
The preparation of Management Accounts is particularly crucial in the early years of a business and also for businesses where turnover tends to fluctuate.
Whilst there is a cost in connection with preparing Management Accounts there is also a cost (and sometimes a significantly higher cost) in not preparing Management Accounts.
It is important for all businesses to have some form of ongoing financial control. We endeavour to fully understand our clients business needs and to assist our clients in ensuring that systems are in place to monitor this.
Whether or not Management Accounts are required (and indeed, how often these would be required) can only be determined on an individual client by client basis.