Credit where credit’s due...

Abbreviated accounts filed ten months after the year end.

"At last! What a horrible year it was, glad that’s out of the way. Well, that is all my accounting done for another year apart from a few other bits and pieces to keep the taxman happy. Still the accountant and bookkeeper take care of all that. Job done, next!”

“What’s that? Our main supplier has cut our credit lines? Why? Because our latest set of accounts as filed at Companies House aren’t very good and are out of date? But that was ages ago! What about those new orders we’ve just won in the teeth of the recession? A couple of them gave us some cash up front and we’ve just banked some large receipts on a profitable old job so we’re quite flush at the moment. However we really need those additional supplies. You want a set of management accounts? What are they when they're at home?”

Genuine quotes from a small business owner? Maybe not yet, but they soon could be. Research by Graydon, the credit management specialists indicates that the lack of publicly available financial information could lead to many SMEs being refused credit by key suppliers. Therefore such businesses may need to have up to date financial information available to share with credit rating agencies. Indeed Graydon have teamed up with Validis to develop their own enhanced credit information service based around validated up to date management accounts.

The increasing number of financial reporting obligations that are likely to be imposed on SMEs don’t end there. Debate is raging within financial reporting circles as to when and how SMEs can be brought into the International Financial Reporting Standards (IFRS) net. Indeed, if the Accounting Standards Board has its way, it could be that our much loved UK GAAP will soon be a feature of history textbooks rather than accounting textbooks, as companies will ultimately be expected to adopt either full IFRS, IFRS for SMEs or the FRSSE for smaller entities.

Funnily enough, during a recent clearout, I came across an old exam paper that posed the question as to whether the future should be “accounting for everyman” i.e. simple and understandable or a highly specialised profession. It seems to have gone in the direction at the latter, with accounts being increasingly detailed and complex and requiring an in depth study by experts in order to fully understand what they are actually saying. This was particularly brought home to me when analysing the accounts of a couple of quoted US companies for a client recently (although ironically the disclosure requirements for unquoted companies in the US would appear to be minimal).

Perhaps another anguished cry can be added to the list of quotes above. “International Accounting Standards? But we don’t do any export business! Help!”