Projections/Management Accounts

Bank Loan

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Hello

Our client is trying to get a bank loan, As part of the bank's due diligence process, they need projections/management accounts looking ahead 12 months. The bank representative said it is normal practice for accountants to provide this information.  I would be grateful for views/comments on:

. Is it normal practice for an external accountant to provide projected/management accounts?

2. If normal practice,  how can I protect myself from the mighty banks should client default on their loan?

Thanks

 

 

 

 

 

Replies (7)

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By Accountant A
28th Feb 2017 14:58

The question of forward looking statements has been raised before and you should certainly see what your professional body has to say about what you should and shouldn't do. (Presumably a PI issue also.)

Any accounts/budgets/projections are a matter for the client. If the client asks you to prepare those, you do so on the basis of the information and assumptions that he/she tells you. Any work should make crystal clear what information etc., you have relied upon.

What you don't do is take any responsibility for the accuracy of the figures (beyond the basics like arithmetic) and certainly not for any failure to achieve targets.

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By Duggimon
28th Feb 2017 15:18

Your accountants certificate and anything else you sign off on regarding your accounts should state unequivocally that they are projections, based on the best information available, but that they are not to be relied upon as anything other than estimates.

The information itself has to come from the client who knows their market, their customers and their plans. It's your job to make sure the information is as complete as it can be and that any estimates made are reasonable and prudent. When you have to guess, err on the cautious side.

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By User deleted
28th Feb 2017 15:24

You're providing professional information and, NOT, a personal guarantee. Make that clear, in your commentary.

What does your professional bodies guidelines have to say, on the topic?

Thanks (1)
Glenn Martin
By Glenn Martin
28th Feb 2017 16:12

Are your clients expecting a big up lift for the projected year.

If its just an inflationery uplift on previous years figures you should be able to make yourself comfortable around that and use the disclaimers already mentioned.

If client is pushing you a big uplift I would back heal it.

I did one a year or so ago, the bank did not have a clue around the figures. It ended up going back and forth for weeks.

Thanks (1)
RLI
By lionofludesch
28th Feb 2017 17:46

Haven't been asked for one for many a year.

They're worthless, aren't they ? No more than informed guesses.

Thanks (1)
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By WhichTyler
28th Feb 2017 20:46

It may be normal, in fact valuable, for an accountant to help their client produce forecasts. But they are finally the client's forecasts and should be submitted to the bank by the client...

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FT
By FirstTab
28th Feb 2017 22:36

Thanks for the helpful response.

Regarding production of the reports since the client uses Xero, I will, for the first time, try out Xero Addon Spotlight reporting. It pulls data from Xero, that can easily be adapted.

The app has good reviews. Anyone used this app?

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